A home loan helps you buy your dream home. You can repay your loan in EMIs (easy monthly instalments). Before applying for a home loan, compare their interest rates, EMIs, and tenure.
Most people choose a home loan with the longest term, as it reduces their financial stress. Taking a long-term loan means you pay smaller EMIs every month. However, it also means you pay more interest than if you had chosen a shorter tenure.
Let’s check out 5 simple ways of saving money by reducing home loan interest rates.
1. Prepayment of the Home Loan
Prepayment means paying the loan as soon as possible or before the term of the loan ends. Prepayment of loans come with many benefits. For one, it reduces the interest you pay. Shorter tenure means lower interest. If you pay the loan soon, you will spend only a small amount on interest payments. It is the easiest way to reduce the home loan interest rates in India.
2. Research and Compare the Rates
A simple Google research will help you find the current home loan interest rates. Banks charge different interest rates on home loans. The interest also depends on your credit score, employment status, existing loans, and the bank you choose. Check with different banks that offer the lowest home loan interest rate and flexible repayment plans.
3. Use PMAY Scheme
The Pradhan Mantri Awas Yojana is for first-time homebuyers who are building a pucca house. If you apply for a home loan through PMAY, you will get a subsidy of up to Rs.2.67 lakhs.
The subsidy makes home loans an even more affordable financing option.
4. Home Loans Balance Transfers
If you are unsatisfied with the current home loan interest rates and repayment plans, you can switch your lender.
Switching your lender is the best way to save money on interest and other fees. Once your balance transfer request is approved, the new lender will repay your loan to the existing lender. Now you will have to pay the new lender, following their repayment terms. By transferring the unsettled amount to another bank, you can reduce the total interest to be paid and lower the monthly instalments.
5. Pay More on Your Down Payment
Banks pay 75% to 90% of the total cost of your house to the seller. You have to pay the remaining amount, which is called the “down payment”. This can be 10% to 25%. It depends on the bank and how much you can afford. It is not necessary to increase the down payment but paying more means you can reduce your home loan interest rates.