Owning a house is a coveted dream for many, which they can fulfill by availing a home loan. However, it comes with an enduring burden of EMI, which tends to put a significant dent on your monthly income. However, when you use a strategic approach, you can reduce the burden of home loans. Below are some tips that will help you with the same –
Go for Longer Tenure to Reduce EMI
Reducing the EMI while extending your loan duration is a great way to lessen the financial burden. Before taking the loan, you can use the home loan calculator to adjust the EMI and tenure that is feasible for you. If paying high EMI leaves you no room for your other expenses, then you can reduce the monthly loan payment and continue paying it for a longer time duration. And when your financial abilities increase, you can pay bigger EMIs and reduce the tenure.
Consider Bigger Down Payment
RBI allows lenders to provide finance up to 75% to 79% of the property’s cost. The borrower has to pay the remaining amount as a down payment.
Typically, borrowers tend to go for a lesser down payment; however, going for higher down payment is more beneficial in the long run. This is because higher down payment implies lesser overall loan amount, which in turn results in the lower interest rate and EMIs.
Moreover, making more down payment increases the probability of getting your loan approved. However, make sure you do not compromise with your emergency saving while making a down payment.
Transfer your loan with lower ROI
If your existing home loan rate is too high for you to bear, then you should consider switching to another financial lender that offers a lower rate. In order to transfer the loan, you will have to pay a certain processing fee along with a percentage of your loan balance.
Make sure you weigh the cost associated with loan transfer against the interest benefits you will be getting. If the difference is small, then the transfer is not suggested. But if there is a significant difference then it is one of the best tips that will reduce your loan burden.
Make Lump-sum Repayment at Different Intervals
By making a repayment of even 1 lakh INR in the duration of three years can help you save up to Rs 1.88 lakh and lower your loan tenure by six months on a home loan of 50 lakhsINR with 9% floating interest rate. If you continue to repeat such lump sum repayments in regular intervals, you can save on EMI as well as reduce the loan tenure to a significant margin which will save you a lot of money in the end.
Try to make these payments in the initial years of the loan, in order to optimize benefits as during this time, the principal outstanding is more.
Home loan are a long-term commitment, and repaying the amount can go on for a really long time. This can put financial stress on you. Above are some important tips that will help you reduce the financial burden on your home loan.