Everyone dreams of finding the perfect home, but with that comes a home loan and certain complexities. The interest rate is one of the main factors when deciding on a house loan. The proportion of the principal amount that the lender charges the borrower for using the principal amount is known as the interest rate on a home loan. Home loan cost is determined by the interest rate banks and other non-financial entities charge.
Recent months have seen a decline in interest rates. Given the size of the investment, even a tiny difference in the interest rates offered will significantly impact you. If you don’t have a perfect mind map, paying your home loan EMIs (equated monthly installments) might cause severe stress on your monthly budget. Sometimes poor planning results in you paying more toward your debt.
Let’s discuss a few of these strategies that can lower the interest rates on your mortgage.
Shorter Home Loan Term:
Although choosing a shorter term will result in a higher EMI, it will guarantee that your principal is paid off much sooner. Since interest rates are based on principal, paying the principal amount sooner will help somewhat reduce the total amount of interest that must be paid.
Pay More EMIs:
This may sound a little challenging, but if you wish that debt to be paid off quicker than anticipated, try paying extra EMIs. Your principal amount and, in turn, the interest will be reduced if you pay extra toward your EMIs. Increase your EMI payment for your house loan, as you start receiving annual appraisals from your employer. This will lower your loan’s principal balance and, of course, its interest rate.
Online Interest Rate Comparison:
Before choosing a particular product or lender, you must research loans thoroughly and analyze rates. Various third-party websites can help you know about lenders and their loan charges. It is, therefore, best to examine the home loan rates offered by all banks before settling on a certain bank or home loan program.
Try to negotiate Your Loan:
Maintain a keen eye on the market’s current interest rates. The existing lender may give you loans with cheaper interest rates. You may then move to a different bank for your mortgage. However, you must review all the related terms and circumstances before moving to another lender. Make sure that the cost of switching to a supplier of housing loans with a lower interest rate does not exceed the savings resulting from a low-interest rate.
Change to Lending Rate Calculated on Marginal Cost of Funds:
From base rate to MCLR, or marginal cost of funds-based lending rate, all banks switched over in May 2016. This action was made to enable borrowers to profit from any change in the interest rate on their loans. Choose what suits your monthly budget rate.
Avoid skipping payments:
Lenders may consider you a tax avoider and take action against you if you miss three EMI payments in a row. The lender will issue you a letter informing you that failure to pay your debts by a specific date could result in losing custody of your collateral. One default is sufficient to lower your credit score by at least 50 to 70 points. If your income is interrupted, you can contact the lender and ask for an EMI-free time. Banks often waive your EMI payments for three to six months if you’re in a job or your commercial activities have been delayed.
Everything you require to know about reducing your house loan interest rates has been discussed in the points above. Those with a long history of employment and a consistent or increasing salary are likely to be preferred by lenders. A loan officer will check your employment status before finalizing your loan. Your home loan approval is expected to be impacted if you resign or change jobs during the closing process.
The interest rates on house loans are at a record low right now, making it the perfect moment to apply. You should transfer to a lender giving cheaper interest rates if you’ve previously taken out a home loan. One of the lifelong commitments is paying off a mortgage. The most effective way is to choose a loan that fits your lifestyle and doesn’t stop you from living your desired life.