So you have finally found your new home! So far so good…
Finding the right Home Loan is the next on your mind. Interest rate is one of the primary concerns when finalizing a home loan.
There has been a reduction in the interest rates recently. A little difference in the interest rates offered will make a great difference for you since it is a huge investment.
Let us throw light on some of these smart ways that can help you reduce interest rate on home loan.
- Shorter Home Loan Duration
- Pay Extra EMIs
- Pay Off Extra Annually
- Get Your Home Loan Refinanced
- Shift to Marginal Cost of Funds Based Lending Rate
Shorter Home Loan Duration
Although, going for a shorter duration will increase the EMI amount, this will certainly ensure that your principal amount is paid off much earlier. Since, interest rates are calculated on principal amount, payment of principal amount earlier will help in marginal reduction of absolute interest to be paid as well.
Pay Extra EMIs
Well, it may seem to be a little difficult, but try paying extra EMIs if you really want your loan to be clear earlier than you expected. Paying EMIs with extra amount will also help in reduction of your principal amount and thus the interest in turn.
Pay Off Extra Annually
Once you are appraised annually by your company, increase the amount you pay EMIs for your home loan as well. This will reduce the principal amount and of course the interest on your loan.
Get Your Home Loan Refinanced
Keep an eye on the interest rates prevailing in the market. You may come across loans with lower interest rates offered to you by the current lender. This is when you can switch to another bank for home loan. However, before switching to another lender, you must check all the terms and conditions attached to it. Make sure that savings accrued from a lower rate of interest are not lower than the cost of switching to a housing loan provider, with lower interest rate
Shift to Marginal Cost of Funds Based Lending Rate
Since May 2016, all banks shifted to MCLR or marginal cost of funds based lending rate from base rate. This step was taken to help borrowers benefit from any change in home loan interest rate. While applying for any loan that offers low interest rates, please make sure you zero in on a loan that matches your monthly budget.
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