5 Essentials tips to reduce home loan EMI Bajaj Housing Finance
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Depending on the timing of your loan disbursement, your loan would be continuing in same old regime if you have not switched to a new regime. A responsible borrower will typically qualify for lower interest rates if they have made all their repayments on time. Despite this, many home buyers and refinancer's skip negotiations and choose the first lender they speak with. On 21 February, the Reserve Bank of India in its monetary policy statement has asked banks to link the base rates to the Marginal Cost of Funds based Lending Rates from 1 April 2018. Interest rates on home loans obtained before April 2016 have not been revised by banks in line with market rates.
If your home loan documents have this, then please provide a written request to your bank manager to apply the lower rate of interest to your home loan. Here are some easy-to-implement ways to reduce your home loan EMIs no matter which bank you have taken it from, or, are in which year of loan repayment. When ownership of a house comes along with the responsibility of repaying a home loan, one is always on the lookout for opportunities to reduce home loan EMIs and pay off the loan faster. If you have maintained a good relationship with your existing lender, you can negotiate the service terms of the home loan. This way you may be able to procure lower interest rates on your loan amount. Choose from one or more of the options listed above to recover or reduce the interest paid on your home loan to help you save both money and time.
Increase the amount of EMIs yearly
After April 1, 2016, all variable rate loans from banks were linked to the lending rate based on the marginal cost of funds , which was then replaced by the external reference rate from 1 October 2019. Depending on the timing of your loan disbursement, your loan will continue under the same old scheme if you have not switched to a new scheme. When it comes to home loans, there are a bunch of banks and finance companies offering them. However, before choosing the lender, do your research, and go for the lender who offers the lowest interest rates. Even though you have already taken the loan, make a comparison of the interest rate charged by your lender with other lenders. If you find a suitable option with a low rate of interest, it is high time you should shift your loan to a new lender who is offering lower interest rates.
This will not only help you reduce the EMI of your loan, but will also help you save big in the long run. If your lending bank is offering low rate of interest for home loans as per it’s revised circular, it is applicable only to new loan applicants. For existing home loan borrowers, the rate of interest at which the loan was sanctioned is the percentage that will be applicable. Floating rate of interest for loans are generally 1-2.5% lower than the fixed rate of interest.
How to Reduce Your Existing Home Loan EMI
If the borrower does not work on his financial planning carefully, the EMIs he needs to pay will affect his monthly budget drastically and make his life a bit harder. Additionally, you should also remember that the longer your loan term, the higher your interest expense will be. If you prepay some of your loan you can lower your EMI payments by negotiating with the lender where you must ask the lender not to reduce the total loan repayment tenure and instead reduce your EMI amount.
As a result, the term of the loan decreases and the loan is repaid faster. However, if you do not wish to reduce tenure, you can ask your lender to reduce your EMI after a substantial prepayment. Since home loans is a financial liability for many years, a borrower always looks for the time when he can prepay the principal amount and free himself from the EMI burden. Although, if your loan is on a floating rate, you can go for prepayment without any additional charges. But, if your loan is based on a fixed rate of interest, you will have to pay a prepayment charge which is usually between 1 to 5% of the principal amount. In the above example, by switching to a floating rate loan the borrower will save Rs 4,869 per month on EMIs and Rs 5.85 lakh on interest payment during remaining tenure.
Loan Against Property
Since a part of the total price of the item is borne by the customer, the amount that the customer will have to borrow as loan will also come down. The interest of a loan is calculated based on the principal amount borrowed by the customer. Therefore, the higher the loan amount, the more money you will have to pay as interest and the higher your EMI amount will be.
Highlight the fact that you have been a loyal customer of the bank for the past several years with a consistent history of transactions. You could also mention that other banks have offered lower interest rates for the same loan and hence seek a loan transfer. And conclude by requesting them to lower the interest rate since other banks are offering you X% interest while you’re paying Y% here. The above-mentioned points have covered everything you need to know about lowering your home loan interest rates.
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Various other facilities, wherein you may be able to pay your loan amount back easily, are also available to reduce the burden on customers. You can reach out to the banks’ customer service if you need help at any time. The amount paid in advance while purchasing is referred to as a down payment.
Due to this, most home loan borrowers are always on the lookout for ways to reduce their equated monthly instalment outgo. Let’s say you had availed of a fixed-rate Home Loan, the chances are higher that you are paying a higher Home Loan interest rate and will continue to do so all through your loan tenor. Lenders generally charge at least a 1-2% higher rate on fixed-rate Home Loans. Lenders finance up to 75–90% of the property’s value, leaving the balance 10–25% for you to service by means of a down payment. While you must bear this amount, it is always a good idea to see if you can pay more.
A higher rate of interest can make repaying your home loan that much costlier. With a higher rate of interest, the amount of EMI which you have to pay automatically goes up. Home loan lenders are allowed to finance up to 80-90% of the amount to the borrowers, and borrowers should not focus on arranging the minimum amount of 10-20% as a downpayment. When the borrower gets an increment in his salary or gets a bonus, he should use that extra money to pay the home loan EMIs, which will reduce the loan tenure over the years.
Everyone wishes to own a beautiful house in a perfect location, where they can spend their life peacefully.
Of late, banks are giving lucrative offers with the rate of interest on home loans. A long tenure of 25 to 30 years will reduce the monthly instalment amount, while a shorter tenure, such as 10 to 15 years, will reduce the overall interest amount. Your credit score reflects how responsible you deal with borrowed money. A score of over 750 is considered good as it suggests financial fitness.
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