Getting a Home Loan is a necessity. However, with prices of property ever-soaring high, almost all salary earners will never be able to buy a home unless they take out a mortgage at the right time from the right lender.
In most cases, Home Loans come with floating interest rates, but some banks offer fixed rates, and some other banks offer hybrid interest rates where the interest rate remain fixed for some of the initial years (commonly first five years) and then it starts to float as per market and RBI rules. Choosing the best Home Loan along with the most suitable Home Loan interest rate from the very beginning, is very important to ensure smooth experience all along home buying and loan servicing tenure.
For instance, Tata Capital Home Loan can be availed for housing finance ranging from up to Rs. 2 lakh to 5 crores. Tata Capital Home Loan interest rates start from 9.25% p.a for a maximum period of 30 years. The company offers Home Loans for purchasing constructed residential property, for purchase of land and construction of a residential property, home expansion, and balance transfer of existing Home Loan from any other lender.
Bank of Baroda is also a premiere bank that offers Home Loans at very attractive terms and conditions. They offer Home Loans with minimal processing fees and interest rates. The current interest rate on Bank of Baroda Home Loan is as low as 9% p.a. Furthermore, they offer a 0.25% discount on Car Loan interest rate to their Home Loan borrowers. The bank also provides a free Credit Card to the customers who avail of Home Loans from them. They will offer Home Loans for as long as 30 years with the ability to get Top Up Loans on the current Home Loan. Attractive Balance Transfer schemes are also available.
After you have serviced your Home Loan for some time, you would be in the proverbial ‘good books’ of the lenders. This means that the time is ripe for you to explore some ways to reduce your loan commitment and save some money on the Home Loan EMI payments. The fact that you have been paying your EMIs on time and have been a reliable borrower for the Home Loan provider will make them more amenable to offering you a better deal.
Here are some of the common ways in which you can work with the mortgage company to save some of the money you would have paid them otherwise.
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This is easily the simplest way to get your interest rate down. When you have serviced your Home Loan for some time, you will realize that you have strengthened your Credit Score to a considerable degree and the market conditions have changed significantly since you originally availed of the housing finance.
Now is the perfect time to shop around for balance transfer options. With HLBT, you will get many attractive deals on Home Loans, which may not have been available earlier. You can certainly benefit from the fact that the new lender will consider you a prime borrower and offer you better than market interest rates.
Even if you do not want to do a Balance Transfer, there is nothing wrong with calling up customer care of your current lender and telling them that you are getting a great deal on the Home Loan Interest Rate from their customers. Tell them that if they are willing to beat this new offer, you will continue with them, or else you will take your business elsewhere. Nothing beats a bit of good old-fashioned bargaining when it comes to getting the best deal on any loan. At the very least, your lender will not want you to walk away and will move you to their prime customer plan with a better deal.
The amount of money you pay as a prepayment of your Home Loan is counting against the outstanding loan principal. As your principal amount goes down, so does the amount that you will be paying out as the interest component. In this method, you are not as much reducing the interest rate on Home Loan as you are reducing the amount you will pay as the interest component on your entire repayment schedule. The benefit of a prepayment may not seem immediate, but in the long term, it will save you a lot of extra money. Make at least one EMI equivalent prepayment every year.
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This may also seem like a counter-intuitive method, but it is a mathematically effective way to reduce your Home Loan payout. Because you are paying a larger amount of money as EMI, you are also paying more of the amount in your principal component. As with the same prepayment of the loan concept, you are following the same routine of paying early to slice off your principal component. This will increase the immediate pain, but in the long run, you will save a pretty penny. If you can increase your EMI to the extent that your new total annual outgo is equal to 13 months EMI on the previous plan, you can easily pay off a 20 years loan in 13 years.
This is more of a last resort method and is also a kind of a hit or miss thing. The concept is to increase your Home Loan duration at the time when the bank is running a scheme of low rates. You will have to check with the customer care department of the lender or your loan officer to see if you can get a better deal on the home mortgage interest rate in case you stretch the duration of your Home Loan. It will, of course, bring down your per month instalment amount for the duration of loan but you may actually end up paying more money to the lender.
All in all, there are a number of ways in which you can bring down the Home Loan interest rate on your mortgages, and most of them will work with proper communication with your lending company. Before you reach out to them, work hard on your pitch, and get all stats and facts ready with you.
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