Nowadays, fulfilling your dream of owning a house has become seemingly affordable with many home loan options provided by financial institutions. But, on the other hand, the interest you have to pay might feel like a burden in the long run. So, it is always preferable to choose an option with a low housing loan interest rate than others.
Following are some tips that would help you reduce your home loan interest rate –
1. Comparing interest rates
The first and foremost step is to research and compare various types of interest rates online. Financial institutions levy varied interest rates on their home loans. It is wise to look through all the policies of these institutions individually. This way, you can select a financier charging the lowest rates. It also offers you a comprehensive gauge of the overall market rates on housing credit.
2. Increasing the down payment
A very effective way to reduce a housing loan interest rate is to increase the amount of down payment. Most financial institutions provide about 85% of the total valuation of a property, which means you only have to pay 15% as your initial payment. But if you substantially increase your down payment, the lower is the amount of loan you avail, which generously reduces the interest amount as well. Moreover, a higher down payment implies lowered risk and allows you to negotiate rates.
3. Increasing the EMI
Various financial institutions offer provisions of increasing or decreasing instalment amount. If your pocket permits, consider increasing the EMI. This will help in reducing the repayment tenor. It will also notably reduce the home loan interest you are liable to pay.
4. Home loan balance transfer
It is yet another way to reduce the burden of the high interest rate. If other institutions charge lower interest rates than the present one, consider opting for a home loan balance transfer. It requires you to foreclose the loan with the existing and shift the remaining principal amount to another financier so you can save on the cost of interest.
To simplify and quicken the process of a loan application, certain financial institutions provide pre-approved offers. These offers are available on a vast range of products including home loan and loans against property. You can check your pre-approved offers by providing some necessary details such as your name and phone number.
5. Opt for a short tenor
The longer you take to repay a home loan, the lesser will be your EMI amount. But, on the other hand, that could lead to higher interest outgoes. So, to decrease your housing loan interest, choose a shorter tenor. While the amount of EMI will increase, you may not worry about paying higher interest than the loan amount.
6. Negotiation with institutions
If you possess a healthy credit score of above 750, financial institutions tend to extend offers at low-interest rates. It also puts you in an advantageous position to negotiate for a lower housing loan interest rate.
However, it is always advised to thoroughly check the policies of different institutions to get better interest rates on home loans.
Above all, however, make sure to get the lowest housing loan interest rate by comparing different institutions. It is one of the most effective tips to reduce home loan interest. Besides these, certain financiers offer loans at relatively moderate interest rates if the applicant is a woman. Verify if the financier you choose has such policies in place or not to obtain a loan at low rates.