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For most Indians, buying a house is one of the biggest milestones in life. This is especially true for those who have been living on rent for a very long time. As of 2018, only 28% of urban Indians lived in rented houses as compared to 54% in the early 60s. This highlights how Indians have gradually started living in self-owned properties.
Earlier it used to be difficult for those without inherited capital to buy a new house. However, over the last couple of decades, this has changed. Thanks to wide-availability of home loan at competitive interest rates, aspiring homeowners can transform their long-held dreams into reality.
But one is also likely to have several other responsibilities such as spending on lifestyle expenses, saving up for children’s’ education, investing for retirement etc. Therefore one is always keen to reduce one’s home loan burden.
Here are some steps that would help one to do that:
Step 1: Opt for a longer tenure
Choosing a loan with a longer tenure will decrease your home loan EMI drastically. Hence, it is a wise choice to lower the EMI outgoing by increasing the loan tenure. For example, a Rs 53,984 EMI on a Rs 60-lakh home loan running at an interest rate of 9 percent on 20 years will become a Rs 48,277 if the term is extended to 30 years. You can reduce the loan tenure and pay bigger EMIs as your wage increases in the future. You can utilize an online home loan interest calculator to make such calculations.
Step 2: Put your bonuses to good use
Use your bonuses carefully. Don’t fritter them out on impulsive investments or expensive holidays. Use them to pay additional EMIs. If you pay off your loans early, it lowers the loan maturity time, interest rates and helps in a reduced EMI. You can calculate your interest rate after paying this additional instalment using a home loan interest calculator. All lenders offer a ‘none’ prepaid fee on all floating term loans to individual borrowers who have been approved.
Step 3: Choose a bigger Down-payment
Although most borrowers choose to settle for a low down-payment, it is better for the loan applicant to pay a higher down payment. A higher down payment results in a lower loan amount, resulting in lower interest rates and lower home loan EMIs. However, one must ensure that one’s emergency fund or investments made for achieving certain goals aren’t used for the downpayment. Therefore if one is planning to buy a house, it is advisable to begin saving up months in advance for a downpayment.
Step 4: Consider Offers from Multiple Lenders
Always compare home loan EMI, interest rate, processing cost, etc. among available loan options before finalizing a lender. The interest rate and other associated costs will vary across various lenders based on different factors. For example, many lenders give customers with better financial backgrounds home loans at reduced rates and costs. Some are now pricing their loan rates based on their job or workplace profile. Comparing interest rates and features is better achieved by visiting online financial marketplaces. These sites make it easy to match your job profile, monthly salary, and other qualifying requirements with the home loans provided by different lenders.
Home loan help you realize your dream of owning the perfect home. EMIs can be stressful but following the steps mentioned above will surely get some load off your shoulders. It is also advised that you visit any online home loan interest calculator to calculate the resulting interest rate and EMI before you make any lump sum payment.
