The reduction in repo rate and RBI’s stance over it in the following months has kept borrowing affordable as financial institutions are extending a credit against affordable interest rates. The same can be said about the home loan interest rate. However, prospective borrowers can reduce this applicable rate further by keeping a few pointers in mind.
5 simple ways to lower the home loan interest rate
Here are 5 tips on how to reduce the applicable housing loan rates –
- Make a higher down payment
One of the easiest ways of reducing the housing loan interest rate is by making a higher down payment. Since financial institutions do not extend the total property value as credit, one needs to submit a down payment to secure loan approval.
Additionally, making a higher down payment will reduce the principal loan amount, lowering the lending risk. Therefore, it will enable borrowers to negotiate and secure a better interest rate.
Compare for better interest rate
To get a competitive housing loan interest rate, individuals can compare different loan offers from multiple lenders. Since this factor of a home loan will vary from one lender to another, borrowers can do market research and then opt for a lender that is offering the best possible interest rate.
- Mention additional income sources
Another effective way of reducing home loan rates is by mentioning all the income sources. Besides an applicant’s primary income source, they can add their income from investments, rent income, and others. Doing so will increase their repayment capacity, and it can help them to negotiate and secure a lower interest rate on the home loan.
Opting for a shorter loan tenor
Increasing the loan tenure can be a tempting offer as it lowers the EMIs. However, it will increase the interest rate applicable on housing credit. The reason is that a longer tenor entails higher lending risk, which prompts financiers to levy a comparatively higher interest rate.
Therefore, to find the ideal tenor that will keep the EMIs and interest burden in check, individuals can use an home loan EMI calculator online. It will aid prospective borrowers to make a knowledgeable decision.
Check for a balance transfer option
A home loan balance transfer is another way of reducing the applicable interest rate on a housing loan. Under these facilities, borrowers can shift their housing credit from their current lender to another one offering better loan terms and a lower interest rate.
It is a beneficial option when borrowers notice their current lender is charging a higher interest than the market.
Apart from knowing the tips for reducing the interest rate of a housing loan, individuals should also be aware of factors that can impact their home loan interest rate. Being aware of these pointers will aid individuals to avoid such scenarios and plan accordingly to service a loan at best possible interest rate.
Furthermore, individuals planning to apply for this financial product should also know that they can avail of home loan interest tax benefits. It will also help them save during loan repayment.
Along with competitive interest rates, leading financiers also extend pre-approved offers. These offers play a pivotal role in reducing the time required for a loan application and streamlining this process. These offers are applicable to financial products like LAPs, home loans, etc. Individuals can now check their pre-approved offers by submitting their essential contact details.
To sum up, the home loan interest rate is an essential component of this financial product, and it plays a pivotal role in determining the total outstanding amount. Therefore, individuals should work and plan accordingly to secure the best possible interest as it will keep their repayment burden in check.