Due to the multiple repo cuts since 2020, borrowers are currently enjoying the lowest home loan interest rates in the past 15 years. As per RBI’s policy, repo rates were reduced by 40 basis points to 4% in May 2020. Hence, various HFCs have cut down their interest rates on home loan by as much as 90 basis points. This has encouraged more consumers to invest in the real estate sector, ultimately benefiting the entire Indian economy.
Nonetheless, there are some conditions that individuals can follow to avail lowest home loan interest rates and reduce their overall cost of borrowing. Keeping this in mind, some effective ways to reduce EMI amounts are available to borrowers prior to the application process.
5 Tips to reduce the home loan EMI
Interest rates and tenor determine the monthly instalment amounts that borrowers need to pay. Here are a few tips to follow to reduce this amount effectively.
- A higher down payment will allow an individual to pay less in the long run because it reduces the EMI amount as the principal amount borrowed decreases.
- Opting for a longer tenor for a home loan will also lower EMI amounts. Nonetheless, with a longer tenor, one will end up paying more interest even though the monthly instalment is less.
- Making pre-payments will help settle the loan earlier, which will reduce future interest costs.
- IF another lender is providing a lower interest rate with better terms and conditions, existing borrowers can take advantage of these rates. They can transfer the outstanding loan balance by making sure that pre-payment charges from the existing lender do not exceed the projected savings.
By opting for Bajaj housing finance home loan, one can get the perks and benefits with respect to interest rates, easing loan application procedures.
Such HFCs also bring pre-approved offers that can make availing the advance faster and easier. These offers can also be availed on other products like loan against property. Individuals can check their pre-approved offer by providing their name and contact number.
Additionally, having an in-depth knowledge of interest rates will also help a customer reduce an EMI loan amount.
Types of interest rates
- Fixed interest rate – This kind of interest loan is fixed and independent of market forces. It remains stable throughout the tenor. One can estimate the EMIs payable against this rate of interest beforehand, which makes it a feasible choice for the home loan applicant
- Floating interest rate – This rate fluctuates over time. If a borrower is willing to go for lower interest rates from the beginning, this is an ideal option. However, estimation of EMI is not possible here. Although, one can expect the rate to lower down in the near future, directly affecting the EMI amount.
Borrowers can calculate their interest payable against each of these options with a home loan interest rate calculator. They can also compare interest rates to choose an appropriate lender who offers a better deal.
Importance of part pre-payments while securing a home loan
After the successful calculation of EMIs with a home loan EMI calculator, one can try to make pre-payment to settle the loan amount faster. It is advisable to choose such a lender who will allow multiple part pre-payments at no additional costs.
To summarise, with emerging online tools and strategies, availing home loan at a low EMI amount in the today’s market is easier than ever. The housing sector, being a booming one, will reduce the interest rates as there will be more repo cuts in the near future to revive the economy. Now one can avail flexible options with respect to interest rates and EMI amounts while buying a house.