5 Ways To Lower Home-Loan Cost
Taking a home loan is a long-term commitment, and it can create a lot of burden for the borrower if it is not planned carefully. The amount runs into several lakhs, and the duration can be as long as 20 years. That is why even a slight rejig can result in big savings; all you need is access to the right information.
Here goes a quick snapshot for you:
Go for shorter duration
A shorter duration for loan can translate into lower cost. Opting for short-term loans, say, for 15 years than 20, is better. Though the monthly EMI (equated monthly installment) may be higher, the interest paid will be less. Since the principal amount is paid faster, it leads to lower interest rate as the interest is paid on the outstanding principal amount of the home loan.
Repay principal faster
You ought to make sure that the payment of the principal amount is done systematically and quickly to the bank to avoid higher outflow of interest cost. You can also make extra payment in cash and reduce the principal amount to be paid, thereby reducing the interest on the remaining principal amount.
Pay more than one EMI
To reduce the tenure of loan as well as interest cost, the borrower can choose to pay more than one EMI every month. But, it is important to pay attention to your finances as payment of more than one EMI depends on a steady flow of income after providing for all the other expenses. Though it increases the burden in the near term, it proves beneficial in the long term.
Pay higher than usual EMI amount
On the basis of increase in your income, you can choose to pay a higher amount of EMI and reduce the interest burden on your loan. The interest rate can be calculated by the amount of home loan, tenure and interest which helps you deduce how much amount is being paid less by paying higher EMI.
Go for balance transfer with lower interest rates
Banks will not reduce the interest rate themselves on the home loan if you, the borrower, do not ask them to do so. If your current bank refuses to reduce the interest rate, you can opt for a bank which is offering the lower rate of interest with a facility for balance transfer.
Also Read: How To Avoid Mortgage Mishap