Housing finance is a sphere of the financing sector that has not just liberated the commerce industry but has contributed significantly to fulfilling human needs. Given the ever-increasing population and the protracted pace at which India is treading the path of development, buying a house is still a pipe dream for millions of people.
Our government has also taken initiatives like ‘Housing for All’ to help people materialize this dream. To contribute their share towards increasing the numbers of systematic homeowners, borrowers need to make smart decisions while availing a Home Loan.
From the point-of-view of a borrower, the value at stake and tenure of the contract are too significant not to make the decisions responsibly. Right information and careful planning are crucial components to handle the unanticipated overheads associated with availing a Home Loan. Since the amounts involved run in several lakhs and consistent digging into one’s savings is never a good option, one needs to invest time in pondering over the smart and efficient ways in which Home Loan interest costs can be reduced.
Interest rates undeniably form the most crucial aspect of loans. Take, for example, a credit of 50 Lakhs to be repaid over a period of 25 years at 10% annual interest rate. Even with an EMI (Equated Monthly Instalment) of 45,435 every month, the total interest cost over 25 years comes out to be 86.3 Lakhs.
Therefore, it is vital for loan applicants to consider every possible step which can help bring this enormous cost down. Discussed below are four exciting ways that can help you save on interest cost of Home Loans, thus making the task of possessing a house simpler.
Competition in the financial sector has enabled consumers to choose from an array of options. You get to play your part by being rational and selecting that bank for obtaining a Home Loan, which offers the minimum possible rate of interest. If you find a decent deal, you can quickly move your existing Home Loan from one financial institution to another by paying off the ongoing loan amount and thus, saving on your interest expense.
In case you have a great credit score and negotiation skills, Apply for a Home Loan Balance Transfer with more appealing interest rate deal or talk your banker into offering you one. If you are wondering ‘where can I get a Home Loan Balance Transfer offers’, every financial institute today provides the facility to attract more customers.
To save money in the long run, it is highly recommended to pay at least 20% of the market value as down-payment. In addition to reducing the amount on which interest is calculated, availability of capital to make the down payment reassures the lender about your financial stability and goodwill.
On the similar grounds, more substantial repayments of principal amount decrease your future interest obligation, allowing for a faster and smoother possession of the house. Though, this might seem hard on the pocket in short run, reduced burden of futile funds and increased savings in a few years, more than covers up for it.
Smart negotiations, clean records, and quick reimbursements are essential for maximising benefits through interest on the Home Loan, but it’s the nature of your credit in the first place which gets everything started. With only a negligible increase in your regular re-payments, a loan for shorter duration can bring down your interest expenses significantly. It may itself come at a cost, but you need to weigh your final inflows to make the right judgment cleverly. Because one right decision can save you many years of liability!
Almost all employees enjoy an increment once a year. This increase in salary can be utilised efficiently by increasing the EMI amount up to 5% every year too. By keeping the rise in EMI in line with the increase in salary, one can ensure the general expenses are covered, and the loan gets repaid faster as well. Even a meagre 5 % rise in EMI annually can substantially reduce the interest cost and help bring down both the total cost and the loan tenure.
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