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Since home loans are long-term loans, even a small deduction in the interest rate greatly reduces the overall EMI to be paid. So, if your home loan is under fixed rate of interest, contact your bank and place a request to change it to floating rate of interest. If you think you have taken a loan at a high interest rate, you always have an option to refinance it. Banks normally offers interest rate based on the MCLR regime which differs from lender to lender. In such a scenario, you can switch to another lender offering better rates. Existinghome loan borrowers having sizeable residual tenure can also transfer their existing home loan to another lender at lower interest and then opt for the home loan saver/overdraft option.
Instead of focusing on the minimum down payment, the borrower should try to contribute the maximum amount from his pocket. If you wish to reduce your EMI amount – be it to make room for other expenses, save more, or simply to reduce your overall interest outflow – there are a number of ways you can go about it. Mr P.N.C. Menon founded SOBHA Limited in 1995 with a clear vision to transform the way people perceive quality. Today, SOBHA is the most trusted brand and only backward integrated real estate player in the country. Among the basic dreams that people have, owning a house is probably the most sought after.
Rate cut by RBI is not certain as a result of inflation concerns
While the interest rates on floating rate have come down to around 7%, fixed rate borrowers would still be paying higher interest rate of 10.5%. A step-down EMI plan is an option offered by many banks and non-banking financing institutions. Per this arrangement, when a borrower takes out a loan, he or she must pay a higher EMI at the beginning of the term.
If you’re about to take a home loan, there are a few things that you must keep in mind. The first is your eligibility criteria, based on your income and repayment capacity. The other factor would be the cost of your home loan, which includes processing fees, administrative charges, prepayment fees, etc.
How to Reduce Your Existing Home Loan EMI
However, you should only opt for longer loan repayment tenures if you think you cannot afford to pay higher EMIs. When you opt for a longer tenure, you end up paying more interest on your home loan outstanding amount. It is often chosen by the borrowers who are in their initial phase of earning as their salary is expected to rise with time. Step-Down, on the other hand, is the option wherein the EMIs will reduce with the time and is beneficial for those who are close to their retirement. Some banks allow one or two partial payments and some allow you even more than that.
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Opt for a Higher Down Payment
A higher rate of interest can make repaying your home loan that much costlier. With a higher rate of interest, the amount of EMI which you have to pay automatically goes up. Home loan lenders are allowed to finance up to 80-90% of the amount to the borrowers, and borrowers should not focus on arranging the minimum amount of 10-20% as a downpayment. When the borrower gets an increment in his salary or gets a bonus, he should use that extra money to pay the home loan EMIs, which will reduce the loan tenure over the years.
Because the customer bears a portion of the cost of the item, the amount that the customer must borrow as a personal loan will be reduced as well. The principal amount borrowed by the customer is used to compute the personal loan's interest. As a result, the greater theinstant personal loanamount, the more interest you will have to pay and the higher your EMI would be. Hence, putting down a significant sum as a down payment is a prudent move. There are some loans which attract significantly high rates of interest, like credit card loans. Therefore, if you have taken a credit card loan, a personal loan and a home loan, it is advisable to pay off the credit card loan as soon as possible.
If your home loan documents have this, then please provide a written request to your bank manager to apply the lower rate of interest to your home loan. Here are some easy-to-implement ways to reduce your home loan EMIs no matter which bank you have taken it from, or, are in which year of loan repayment. When ownership of a house comes along with the responsibility of repaying a home loan, one is always on the lookout for opportunities to reduce home loan EMIs and pay off the loan faster. If you have maintained a good relationship with your existing lender, you can negotiate the service terms of the home loan. This way you may be able to procure lower interest rates on your loan amount. Choose from one or more of the options listed above to recover or reduce the interest paid on your home loan to help you save both money and time.
You should try to make at least one or two partial payments in a financial year. The partial payment will help in reaching the principal amount faster and lower the financial burden. On the other hand, if you go for Repo Linked Lending Rate linked loan from PNB then you can get a loan at a much lower interest rate as the bank's RLLR is 6.80%. Therefore, by shifting interest rate regimes, your interest rate reduces by 0.5%. A large segment of existing home loan borrowers gets so busy with their lives that after repayment starts, they often forget to check how the composition of their EMI is changing. A Home Loan is a sizeable loan with an extended repayment tenor of up to 30 years.
If you have taken the home loan at a fixed rate, you may be paying a much higher rate of interest. The fixed-rate home loan usually charges a higher rate, which is around 10.5%, and this is 1-2% higher than the floating rate home loans. Often, there are situations where you may get a chance to reduce the home loan EMI, but it is not the case with fixed-rate loans, and you have to pay the same EMI throughout the loan tenure.
You can also check your home loan EMI for different loan amounts with the help of the calculator. Under the overdraft option, a savings or current account is opened for the home loan borrower to deposit his/her surpluses and is linked to the home loan account. The interest cost of the home loan is calculated after deducting the balance maintained in the savings/current account from the outstanding loan amount. He/she is free to withdraw from the savings/current account as and when any fund requirement arises. Lately, they have passed on the entire rate hike to customers, amid a rise in borrowing costs. All you have to do is find another lender that offers interest rates that suit your requirements and also check for other charges that they would levy.
A moratorium cancels the EMIs or principal part for a period of time and restructures the loan to an appropriate repayment plan thereafter. However, remember that to receive this benefit, there should be no default on your loan before March 31, 2021, and you can apply for this relief before September 30, 2021. Also, when you opt for a moratorium, you must remember that the interest will continue to accrue during the relief period and the total amount you will have to pay will be much higher. The Covid pandemic has brought unforeseen financial stress to many people and considering the seriousness of the situation, RBI has offered the benefit of loan restructuring to many borrowers.
For instance, five years back, if the floating rate Home Loan could be availed of at 9%, fixed-rate Home Loans came with an interest rate of about 10.5%. If the aspiring borrower had opted for a fixed-rate Home Loan, he’d be at a disadvantage given the scenario. While the interest rates on the floating rate have come down to about 8%, borrowers who had availed of the loan on a fixed-rate are still paying a higher interest rate of approximately 10.5%. Opting for a floating-rate loan makes it possible for you to benefit when the interest rate dips.
It is a method used to avoid defaulting on current debts by negotiating interest rates. If you find yourself in financial distress, loan restructuring is a less expensive alternative to insolvency and can help you lower your EMIs. To top it all, the Reserve Bank of India recently decided to keep the key interest rates unchanged. This has come as a big respite for borrowers amid the ongoing COVID-19 pandemic.
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