Home loans are the best solutions to finance your residence. Everyone dreams of an impressive home where they can be comfortable. Home loans are the way to go for that dream abode, even if it is currently beyond your budget.
Lenders offer relatively low-interest home loans, flexible tenures and excellent repayment structures if planned well. Home loan EMI’s are not burdensome if you calculate your monthly commitments in advance using a monthly EMI house loan calculator. If not calculated, the EMI’s can stress your monthly budget.
If you are planning to buy a home availing of a home loan, then here are few tips to Reduce your Home Loan EMI Burden:
Tips To Reduce Your Home Loan EMI Burden for New Borrowers
Opt For a Longer Loan Tenure
A longer loan tenure will reduce your loan instalments considerably. But it also increases the overall interest of the loan. When you opt for a longer tenure, your lender is satisfied that you have enough time to repay the loan. Hence the approval process is swifter than usual.
Negotiate Terms with The Lender
Lenders are always willing to negotiate with responsible borrowers who have a CIBIL score above 700. The credit scores reflect the responsible borrowing behaviour, and hence they are offered low-interest home loans and flexible tenures.
Make A Higher Down payment
Financial institutions mostly finance only upto 90% of the property, that too depending on your eligibility, as per their criteria. Even if you put up a hard bargain, you will have to finance at least 10% on your own. . If you can pay a higher down payment than you are supposed to, your principal value will reduce drastically. This way, your EMI outgo will also come down along with the tenure.
Extra EMI Payment
You can also plan in such a way as to pay an extra EMI every year when you receive an annual bonus. Such small contributions will highly positively impact your EMI burden. Extra EMI payments can also save your interest rates and also lower your tenure without burdening your budget.
Go For EMI That You Can Afford
Loans with longer tenure have lesser interest rates but increased interest payouts over the tenure of the loan. Whereas loans with longer tenure have lower home loan interest rates, but may cause a strain upon your budget. Remember to use the house loan calculator provided by your lender to strike a balance between the two and opt for the optimum tenure you can afford.
Share Your EMI Burden with A Co-Borrower
Adding co-borrowers for your loan will improve your chances of loan approval and reduce the EMI burden drastically. If you feel burdened by the monthly EMI outgo, include a co-borrower with a stable income and a good credit score to your loan. Your co-borrower can be your spouse, siblings or parents. Additionally, female co-borrowers are eligible for tax deductions under the IT Act. Adding your spouse as a co-applicant will help you collectively save on a lot of tax for your family. You can check if your lender offers discounted interest rates for female borrowers too.
Check For Pre-Approved Loans Before Taking the Home Loan
If you are a long-term account holder with your lender or have availed of a housing loan from a lender, they may offer customized pre-approved loans if your CIBIL scores, repayment habits and your salary meet certain requirements. Pre-approved loans also have the added advantage that they require minimal documentation for approval. So, you can check with your lender’s customer service or online portal for pre-approved loan offers by entering a few details.
Tips to Reduce EMI burden for Existing Loans
Opt for a Home Loan Balance Transfer
If you have already availed of a loan and are looking to reduce your monthly EMI burden, it is better to opt for a home loan balance transfer.
What is a home loan balance transfer?
A home loan balance transfer is a process of restructuring your loan by transferring your balance home loan to another lender who offers you competitive interest rates at a longer tenure. The new lender will consider your application as a new loan, and hence you will have to pay the processing charges and other miscellaneous charges. Ensure that you calculate all costs that you will incur before taking the plunge.
Making prepayments when your finances improve will bring down your loan instalments drastically. While prepayments bring down your principal amount, they will reduce your interest rates as well. The additional advantage of home loan prepayments is that the new RBI law has asked financial institutions not to levy prepayment charges on fixed-rate home loans. The nullification of prepayment charges by the RBI for fixed rates is an added advantage for borrowers to pay off the home loan when their finances improve.
Home loans are long-term investments. Hence, it is necessary to make a smart move by evaluating all criteria, exploring the market offerings, and comparing your options. Look for a lender with lesser home loan interest rates and who is trustworthy at the same time. Good planning will prevent you from making an expensive mistake and being burdened by EMI. Decide today!