Many factors need to be considered while buying a house. Deciding on a budget and selecting a property seem like good points to start with. Once you are aware of the budget, the next thing on the list should be finding a lender that provides a suitable housing loan.
Before zeroing in on a home loan plan, it is important to have a good idea of the home loan EMI payments. This is vital in making sure that the repayment goes through without any hassles.
Here are 5 tips to keep in mind that will help you with your EMIs.
- Look for a lender offering a low home loan interest rate
Lenders do not follow a standard rate of interest for the loans they offer. So, while looking to apply for a home loan, make sure to study home loan offerings by various lenders and their varying interest rates. Also, learn about the terms and conditions for the interest rate. Once you find a suitable home loan plan with a low home loan interest rate, it will help in reducing the home loan EMIs.
- Choose a longer repayment tenure to clear the loan
One effective way of bringing down your home loan EMIs is to go for a longer repayment tenure. A longer tenure involves more monthly instalments with smaller amounts. However, do keep in mind that the interest would be higher since it gathers with each instalment. Make sure to use a home loan calculator to find a tenure that is convenient to you.
- Try to give a bigger amount as down payment
Many lenders offer low-interest rates to borrowers who have kept a low loan to value (LTV) ratio by making higher down payments. Therefore, by making a down payment of above 20-25%, it is possible to get a low home loan interest rate from the financial institution. A high down payment will not only reduce the interest rate of the home loan but also its EMIs.
- Opt for a floating interest rate
Borrowers that have home loans with fixed interest rates are most likely paying a higher amount than those with floating interest rates. This is because lenders usually charge a rate, which is 1-2% higher for loans with fixed interest rates. Today, the floating interest rates have come down to 7%, whereas fixed interest rates are still at 10.5%.
- Make partial prepayment to get the EMIs adjusted
By opting for a home loan with a floating interest rate, you have the flexibility of making a partial prepayment on the loan. There would be no penalty for doing so, and this is very helpful in reducing the home loan EMIs. A partial prepayment is made for the sole purpose of bringing down the outstanding principal amount. This can have a significant impact on the loan tenure as the prepayment leads to the loan getting repaid quicker. If you do not wish to reduce the tenure, it is also possible to request the lender to reduce the EMIs to keep the tenure intact.
So, before you go ahead and apply for a home loan, make sure to go through these tips, which will help you in lowering your monthly instalments. The more you focus on getting a good home loan deal, the easier it will be to repay the loan!
