Prudent Ways To Save On Home-Loan Repayment Amount
Home loan is the prudent way to finance your house. It not only allows you keep your other financial resources intact but you also helps you enjoy a host of tax benefits. But, these benefits are available to you at a cost, which comes in the form of interest rate. Interest is paid along with the part of principal amount by the borrower for a fixed period of time. The equated monthly installment (EMI) is calculated according to the quantum and tenure of the loan. So, it is a procedure through which you repay the loan along with its cost. You can save on this cost or interest rate and fund it elsewhere, for instance, you can use that amount in interiors or you can invest the same and get earnings in the form of interest.
Let us explore various options that can help you to reduce your EMI or the cost of availing of home loan.
Keep the prepayment option open: Housing finance companies and banks provide prepayment option to their borrowers. This benefit might sometimes have a condition or a financial implication attached to it. You should ask your lender if they provide such option. Awareness about this kind of option gives you flexibility to repay the loan amount in lump sum when possible. Prepaying helps you to reduce your principal amount as well as the interest applicable on that particular amount.
Go for balance transfer: In an open market, housing finance companies and banks compete with one another. Each is proactive and provides a number of benefits to their borrowers. This opens up the possibility for an individual to transfer the balance loan from one lender to another. This is called as home loan balance transfer. If you are able to get better services and a lower interest rate from another lender, there is no harm in exploring this option. Through this option you can reduce your EMI and save considerably. At times, you also get some additional incentives like EMI-holiday period or gift vouchers.
Negotiate on interest rate: There is no fixed interest rate on home loans. Lenders have varying rates according to the profile of the borrower and the amount of his loan. This means that you can negotiate on the interest rate offered to you that varies from 8.3 to 8.4 per cent per annum. For instance, if the bank has offered the interest rate as 8.4 per cent, you can negotiate and get the approval for the lowest available rate, which is 8.3 per cent per annum. The difference in the interest rate can result in huge savings in the long run.
Save on miscellaneous charges: There might be some hidden charges applied on the home loan. The borrower comes to know about them at the time when they are actually liable to pay them. Always know the break-up of the EMI to be paid by you in advance. If there are some additional charges besides the interest amount, it is better to negotiate or find the options that provide the loan without these miscellaneous charges.
Also Read: 5 Easy Ways To Lower Home-Loan Cost