For many of us buying a home signals a moment of financial triumph. However, the ownership of a flat or house often comes with a financial burden – that of equated monthly instalments or EMI. So how can one reduce EMI on home loans?
Home Loan: A bigger down payment
Banks usually give a maximum of 80% of the cost of a house on loan. The rest of the amount has to be arranged by the buyer. If you can fund a bigger part of the cost, you would need to take a smaller loan, which, in turn, will create a smaller EMI liability for you.
Therefore, plan years in advance before buying a flat and start saving in instruments of high returns to amass as much of the cots as you can. The more you pay upfront from your pocket, the less the burden of EMI on your head.
Home Loan loan tenure
Usually, a longer payback period of a loan leads to smaller EMIs. But it leads to a tricky situation. If you choose a longer tenure for a smaller EMI, you eventually end up paying more interest in total to the creditor. Therefore, try to make a balance between the total interest payment you have to make and the EMI you can handle comfortably. Choose the tenure of repayment accordingly.
Compare between banks and HFCs
All banks and housing finance companies try to attract customers with competitive interest rates. Don’t fall for any sales pitch and compare the interest rates they offer before selecting one.
Try to make prepayments
After you have taken a home loan, try to channelise any additional funds that you might lay your hands on to prepay part of the loan. It will make you extinguish the loan faster and save interest costs.
Refinance your loan
The interest rate cycle has peaked out in India. Once key interest rates such as Repo Rate is reduced, interest rates on home loans might decline. As and when interest rates drop, explore the option to get your home loan refinanced. It can lead to a reduction in your EMI burden.
Almost all buyers of flats or houses depend on home loans. For most of us taking a home loan is the biggest financial deal that we carry out in our lifetime. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
