With real-estate prices going up, availing a home loan is a viable option to fulfil your dream of owning a beautiful house where you can start a family or retire peacefully. A home loan is one of the significant financial commitments that an individual makes in his/her life. However, long equated monthly instalments and increasing interest rates leave no room for other financial goals, which can be a massive burden on the borrowers.
So, if you are juggling between your home loan EMI payments and other monthly expenses, it is the time to ease the burden. Here are a few smart tips that can help new as well as existing borrowers to reduce their home loan burden effectively.
1. Make a higher down payment.
RBI allows lenders to finance up to 80-90% of the property’s value as home loan, and the borrowers are required to arrange the remaining 10-20% as a down payment. While most of the applicants go for minimum contribution, providing a higher down payment is the best option as it results in the lower loan amount, interest cost, and EMIs. It also increases your chances of loan approval as it reduces the risk of default. But, make sure you don’t sacrifice your entire emergency funds that can be used to achieve other essential financial needs. Otherwise, you will have to borrow more high-interest loans to cover your expenses.
2. Opt for a longer loan tenure.
Another smart tip is to go for longer loan tenure to reduce the amount of EMIs as well as enhance your loan eligibility. However, it is advisable to choose this approach only if you are unable to pay higher EMIs with your current salary.
Longer loan tenure also increases the overall interest cost of the loan. So, before buying the loan, use a home loan interest rate calculator to determine the tenure and the monthly instalments you can pay based on your repayment capacity. But, make sure that the EMI payments are not more than 50-60% of your monthly income as it can hinder you from meeting your other necessary expenses.
3. Go for home loan bank transfer.
This is a widespread practice among borrowers to lessen the home loan burden. If you find another home loan lender who offers better interest rates on your loan, it might be an excellent option to change your lender. This is done through a balance transfer, wherein the remaining unpaid loan amount is transferred to another lender with lower interest rates. This not only results in less EMI amount but also provides you with better loan terms and conditions. However, remember that this also comes with various costs, such as transfer fees, stamp duty on the mortgage, etc. Therefore, your aim must be to grab the deal at lowest or zero additional charges to maximize your savings.
Don’t let the higher EMI and interest costs deteriorate your financial health. The above three useful tips can not only reduce your repayment burden but also help you handle your home loan without too much stress.