Tips for Lowering Home Loan Interest Rates

Having your own home is one of the most surreal feelings in this world. Many who have been living in rented accommodation for all these years are eagerly waiting to put down a down payment and take out a home loan to finance the property.

Instead of paying rent to the landlord, one can plan and buy a house against a mortgage and pay it in EMI. But paying the home loan is a tedious task as it takes around 15 to 20 years and a huge amount of interest is spent on it.

For example, if you have taken a loan of Rs 40 lakh with an interest rate of around 8.5%, you will have to pay a total interest amount of around Rs 31 lakh.

Different Ways to Keep Interest Cost Low in Home Loan

1. Early repayment of loan amount

– One of the best ways to save money and reduce the amount of interest on the loan is to prepay the home loan. One has to be financially disciplined and committed if one wants to make the prepayment of the home loan.

– In addition, if a borrower chooses to prepay the loan, he does not have to pay pre-closing costs if the interest rate of the mortgage is revisable (floating). Although in the case of a fixed rate, a penalty or fee must be paid.

– Prepayment helps to repay the loan as soon as possible. Although the final amount a borrower must return to the bank depends on the outstanding amount of the loan, the remaining term, etc., several prepayment systems help reduce interest charges on the home loan.

– Regardless of the amount, prepayment at regular intervals helps to close the loan much earlier than the original term.

– A borrower can prepay a fixed sum on a regular basis and effectively reduce the outstanding amount of the loan. A low outstanding amount will simply translate into a low interest rate.

– It is necessary to make the prepayment of the amount of the mortgage in previous years, rather than doing it towards the end. This helps in saving more as the interest portion in EMI is higher in the early years of the loan.

2. Applicant can opt for a lower interest rate scheme

A home loan seeker can save money on interest if they opt for a lower interest rate plan. Negotiate with several mortgage lenders and check the interest rate with several banks before choosing one.

If you are an old and loyal customer of a particular bank, the bank may offer you a loan program with a lower interest rate.

Therefore, doing some research work beforehand never goes in vain. This will help you save a lot of money on a home loan.

3. Start investing

Before taking out a home loan, if you have invested in the right places, it will be very beneficial to you. You can use the investment as a down payment for the home loan.

If a huge amount has already been paid at the start of the home loan, the amount you will borrow will be less and therefore the interest rate will be lower.

4. Transfer the mortgage balance

Sometimes a borrower can even transfer the home loan balance from one bank to another. In such cases, sometimes the bank taking the existing home loan offers lower interest rates.

This saves a lot of money. Opting for the home loan balance transfer is simple and effective in order to save interest.

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Bernadine J. Perkins