The Buyt Desk
Buying a home is an important decision. Most of us take a home loan to finance a home. But before finalising the lender you must put in ample leg work in comparing the home loan rates of various banks and financial institutions. By doing so you find a good deal on home loan rates and end up saving more.
Interest Rate is an important factor which can make or break a deal. A difference of merely 0.5% in interest on the loan amount of 50 Lakh for 20 years tenure could result in higher EMI that can outgo up to Rs 3.64 Lakh in totality. Therefore, it is imperative that you check all the possible options before making the final decision.
Here is how new home loan borrowers can reduce EMI size-
Chose The Right Property – Lenders often have a list of negative properties where they do not extend their hand for the loan approval. When you are shortlisting the property, make sure you do the property search in a way that meets all the conditions. Only then you would be able to coordinate with the lender offering the lowest interest rate.
Find A Lender Offering The Lowest Interest Rate Many online platforms present a list of banks offering loans at a lower interest rate with their terms and conditions. However, the bank interest rate varies according to the applicant’s profile. Thus, you should shortlist five or six banks offering the lowest interest rate and then check the terms and conditions of each lender. Finding the right lender will help you reduce your EMI size.
Try To Make Higher Downpayment – Loan borrowers who make higher downpayment are likely to get a loan at the lowest interest rate. In banking terms, it is a low LTV ratio. By making a downpayment of 20-25 per cent of the property amount, the borrower can keep the LTV ratio low and get a loan at a lower interest rate. Additionally, a higher downpayment means lower EMI.
Increase Your Loan Repayment Tenure – You can reduce the EMI amount by increasing the loan tenure. For example, if you are taking a loan of 40 Lakh for 20 years with an interest rate of 7.5%, the EMI will be Rs 32,224. When taken for 25 years, the EMI will be Rs 29,560. For the 30 years tenure, the EMI will be Rs 27,969.
But the problem with this option is that, for a higher loan, the total interest payout will also be higher. Thus, increasing the loan tenure option, one must choose when there are no other options present.
Choose Home Saver Loan – This option is good for those having a fluctuating income, such as entrepreneurs. The option gives borrowers the facility to pay a lower EMI amount, i.e. only the interest amount in some exception time. Once the monthly obligation gets over, the borrower can restart the regular EMI. He can make higher payments in between to reduce the principal amount.
Nevertheless, this loan option comes with a higher interest rate when compared to other options.
