A recent market report revealed India’s real estate sector would be reaching USD1 trillion by 2030. Rapid urbanization, increasing disposable income, the emergence of nuclear families, and price stability are some reasons pushing the realty sector’s growth. A drastic change was witnessed in home sales volume as well, where the launch of various Government-backed schemes and reduced home loan interest rates had key roles to play.
Even though the reduction of interest rates came with RBI’s decision regarding repo rate cut, financial institutions came up with offers and such concessions to make it more lucrative.
Since the interest rate works as an important determinant of the overall cost borrowers are required to bear for the entire tenor, one must carefully compare available rates. Borrowers who face a hard time handling their monthly liabilities with their existing interest rates can find the following tips to reduce interest charges.
Ways to reduce home loan interest rates
While obtaining a substantial amount to invest in real estate, borrowers inevitably turn towards secured variants like home loans. Even though due to its secured nature, the home loan rates are generally affordable, in the case of high-value loans, your EMIs are bound to increase. To resolve this, borrowers often look for ways to decrease the rate of interest so that the monthly instalments also come down.
Make regular pre-payments
Generally, your home loan EMI comprises two components, principal repayment and interest on this outstanding loan quantum. Prepaying a housing loan can bring down its tenor and the total interest outgo. A salary hike, or work bonus, etc., are the perfect opportunities to part pay a loan and reduce interest liabilities.
Go for a shorter tenor
Choosing a lengthy repayment tenor inevitably increases the overall cost of the loan since you are choosing to pay the interest for a significant duration. On the other hand, if you opt for a shorter tenor, the interest amount will seem convenient to bear after a point.
Even though your home loan EMI might increase as a result, it will help you to quickly get rid of your financial liabilities effectively. In such cases, it is advisable to calculate EMIs before taking a home loan to plan out other expenses.
Get a home loan balance transfer
This particular process basically involves refinancing your existing home loan and shifting to another lending institution that offers favourable home loan interest rates when compared to your existing lender. However, it is advisable to compare multiple lenders and check other charges associated with this process before making a final decision.
To ensure an expedited application process, individuals can also acquire pre-approved offers from renowned housing finance companies. These offers are available on multiple financial products such as home loans, loan against property, etc. Borrowers willing to switch lenders can check their pre-approved offer by providing name and contact details to avail better deals.
Consider opting for an overdraft facility
Overdraft refers to a system where the financial institution pre-sanctions a particular amount of funds to a borrower. However, the individual would only need to service the interest on the amount that he/she withdraws from this loan account and not on the entire approved amount.
Thus, opting for such a line of credit can reduce one’s interest liabilities considerably. However, a borrower must weigh both the pros and cons of such a facility before opting for it.
Apart from these aforementioned ways, borrowers can also utilize other methods, including switching to the MCLR regime to decrease their home loan interest rate. In this regard, having a decent repayment track record and credit score also seems beneficial since the credit score determines your home loan EMIs as well. In order to smoothly handle other expenses, these factors deserve to get your consideration.
Additional Read : How To Pay Property Tax Online In Delhi?