In the words of English poet Robert Southey, “There is a magic in that little world, home; it is a mystic circle that surrounds comforts and virtues never known beyond its hallowed limits.”
Home is indeed your place, your comfort corner where you can be yourself. Building a place you can call home can be challenging. A home loan is the most significant burden a person incurs in their lifetime, the loan with the most prolonged repayment period. If you don't get a proper plan chalked out it can put severe stress on your monthly budget. Your loan amount, interest rate, and your loan tenure are the primary factors of your monthly installments and if you don't plan stuff out you are more likely to pay more than required against your loan amount. It can directly affect your financial well-being and mental health. Always strive for lower home loan interest rates before and after taking out a home loan by following a few vital recommendations.
- Pick for a shorter tenure:
Your loan tenure is a vital factor that influences your interest rate. According to Economic Times a longer tenure such as 30 years can reduce your monthly installments but a shorter tenure such as 15 years can drastically reduce your total interest rate against your loan. Always plan for the duration before going for a home loan so that you don’t end up paying a higher interest rate.
2. Comparing interest rates online:
Before jumping onto some decision it is important to do proper research on a particular product or lender and compare rates accordingly. There are even various third-party websites that can provide you with in-depth information about the rates and other fees charged by the various lenders and make this task easier for you.
3. Make a high down payment:
According to home first most banks and financial institutions lend up to 75%-80% of the total value of the property and you are likely to pay 10%-25% of the remaining amount as a down payment from your pocket. To reduce your interest rate, it is advisable to contribute a higher amount as down payment. The lower the loan amount, the lower the interest rate.
4. Have a good credit score:
It is a known fact that lenders look for customers who have a good credit history. Banks often give lower interest rates to existing customers and those with good credit histories. If your credit score is close to 800, you can get better rates on loans. By repaying all your past EMIs in a timely manner, before the due date, chances are you will be offered lower interest rates on future loans. Sometimes banks offer festive discounts i.e. banks lower their interest rate during festive seasons.
5. Revise your monthly instalments:
There are lenders who allow you to revise your monthly installments. Therefore if you have switched to a job paying you a higher salary or your annual income has increased, it is advisable to revise your monthly installments and increase the repayment amount. This will help you decrease your absolute interest amount against your loan substantially.
6. Balance Transfer
A home loan balance transfer is a facility where you can transfer your remaining balance to a different lender that provides you with better offers on your remaining loan amount. It means you can close your existing home loan account with your previous lender and open a new loan account with a new lender. This way you need to pay a lower interest rate and your home loan EMIs would also decrease.
Therefore, it is always wise to do proper research before applying for a home loan as these are once-in-a-lifetime decisions that have a direct impact on your future
At TEAL, we are building the next generation of property due diligence using big data analytics and machine learning. We provide reliable information about property ownership, registration status, disputes, tax compliance history and all other information that you will need to make a safe and secure property investment. To learn how TEAL can help you in your journey, get in touch with us.