Taking out a home loan to buy your dream home is a significant decision. If you don’t do your homework to choose the best lender, your house loan could be very expensive. In India, there are hundreds of financial firms that offer home loans. Because a house loan is a long-term commitment that might last up to 25 years, even a few percentage points can make a significant impact on your EMIs and total interest expense.
When you take out a home loan, you will be responsible for paying the EMIs for several years. As a result, you’ll need to make considerable changes to your monthly budget to account for the EMIs. The top 5 ways new house loan borrowers can reduce their EMI amount are shown below.
Compare home loan lenders and compare the best rates
A short internet comparison will quickly give you an idea of the different lenders’ home loan interest rates. The interest rate you are offered is determined by a number of criteria, including the market rate, the loan size, your credit score, the payback term, and the down payment you make.
Select a few lenders that offer the greatest interest rates, review their terms and conditions, and choose the one that best meets your needs and budget. However, interest rates aren’t the only consideration when selecting a home loan lender. Other fees and charges imposed by the lender, such as processing costs, late fees, documentation fees, and others, may have an impact on your loan cost. When choosing a house loan lender, you must evaluate various additional criteria in addition to interest rates and costs, such as eligibility requirements, documentation requirements, customer service, payback terms, and so on.
Pick property within your budget
A home loan is a great deal since you just have to pay a small portion of the property’s worth as a down payment, and the lender covers the rest. Although you do not have complete ownership until you pay off your mortgage, you do have possession of your home and can use it any way you choose.
However, when looking for a home, you must keep your budget in mind. Remember that the larger the loan amount, the larger your EMIs will be, and the more difficult it would be to afford them comfortably. As a result, look for a property that fits your budget and has EMIs you can comfortably afford each month.
Save money for higher down payments
A down payment should ideally be a small fraction of the property’s price. The lender pays the remaining balance, which you must repay along with the interest rate. If you save money to make a larger down payment, you will have to take out a smaller home loan and pay fewer EMIs. Borrowers with a low LTV (loan-to-value) ratio typically get lower home loan interest rates.
As a result, rather than using a house loan to finance a substantial portion of your home purchase, you might consider saving money for a few months or years and making a larger down payment. As a result, you’ll need to apply for a smaller home loan, and your EMIs will be more manageable.
Opt for a longer home loan tenure
Another option for lowering your house loan EMI is to take up a lengthier loan term. The majority of house loan lenders in India provide flexible repayment terms. When you apply for a house loan, you can choose a payback period of up to 25 years. This means you have the option of choosing a payback term with low EMIs spread over a loan duration of up to 25 years.
Using a home loan EMI calculator, you may get an estimate of your EMIs. It’s a free online calculator that may help you figure out your EMIs based on your loan amount and term. Your EMIs would be greater if you choose a shorter loan term. As a result, you can reduce your loan EMIs by choosing a longer loan term. Remember, however, that choosing a longer loan term may result in a greater interest outlay.
Improve your credit score
Improving your credit score is another effective technique to reduce your home loan EMI amount. Your credit score is checked when you apply for home loans to establish your credibility. A high credit score suggests that you are likely to keep up with your loan EMI payments and are unlikely to default. As a result, they may agree to provide you with lower-interest home loans.
If you have a low credit score, on the other hand, the lender may reject your loan application or charge a high-interest rate on your house loan, increasing the monthly EMI amount you must pay.