Posted by As per the Residential Annual Roundup 2020 survey, the number of new house supply and sales encompassing the top 8 cities of India witnessed quite an improvement in the last quarter of FY20. It also tells,
- A total of 1,82,639 units were sold in 2020.
- Affordable homes constituted a share of 48% of all units sold till 31st December 2020.
It clearly shows that while the supply and demand for homes in India are on the rise, affordable pricing is one of the primary requirements that aspiring home buyers are looking for.
Moreover, after consecutive rate cuts, the current repo rate is kept at 4% for the first two months of CY21. Hence, it makes perfect sense for aspiring home buyers to invest in a property at an affordable home loan rate. It also makes way to service this credit with lower loan EMI.
Besides macroeconomic factors, individuals can further reduce their interest rate and, eventually, the EMI burden by adopting crucial financial habits. Similarly, existing borrowers can also reap the benefits of this situation and save substantially on interest payment.
Follow these Tips to Reduce Home Loan EMI Burden
Irrespective of the interest rate, both new and existing borrowers can enjoy a reduced home loan EMI by following some simple tips.
For New Home Loan Borrowers
- Choose a longer tenor
Typically, a home loan accompanies a flexible tenor of up to 30 years that provides enough time to individuals for easy repayment. Now, the digital route of taking home loan is better and more convenient. They can choose longer to reduce home loan EMI. A longer tenor not only reduces the monthly instalments but also improves home loan eligibility.
- Opt for a substantial down payment
As per RBI guidelines, there is a cap on the LTV that you can avail to finance the purchase of your property. It means if your lender offers you an LTV of 75% on your home loan, you have to make a down payment of the rest 25% to apply for this credit.
For instance, the current value of a property is Rs.45 lakh, and the applicable LTV is 75%. In that case, the maximum fund you can apply for is Rs.33,75,000, and you have to make a down payment of Rs.11,25,000.
If you make an additional payment of Rs.3 lakh, you only have to apply for Rs.30,75,000. Resultantly, the home loan EMI will reduce accordingly.
- Apply with a co-borrower
Besides improving loan eligibility, by opting for a joint home loan, individuals can split the EMI burden and facilitate faster repayment. Moreover, both parties can claim tax benefits under Section 24(b) on interest payment under the joint home loan facility.
- Settle for lowest interest rate
Since lower interest rates reduce home loan EMI, individuals need to look for a lender who offers substantial funds at a competitive interest rate. You can compare and know with a personal loan EMI calculator. To ensure that, they need to compare different lenders and use a home loan calculator to settle for the most economical option.
However, before applying, you can also use a home loan eligibility calculator to check if you are eligible to avail your desired corpus or not.
Besides new borrowers, existing borrowers can lower their home loan EMI burden in the following ways.
For Existing Home Loan Borrowers
- Prepay whenever possible
One of the simplest ways to reduce the home loan EMI is considering part-prepayment whenever you have a surplus. In this regard, you can make use of the festival bonuses, maturity income from life insurance and other available options. By prepaying, you can either reduce the EMI keeping the tenor the same, or you can keep the EMI the same and shorten the tenor.
However, you need to consider the lock-in period, pre-payment charges and likes, before opting for this facility.
- Opt for a home loan balance transfer facility
Alternatively, you can also opt for home loan balance transfer. It allows you to secure a lower interest rate and better service.
Now that most financial institutions offer home loans with an interest rate lesser than 7%, you can save substantially on interest payment by opting for this transfer.
Select Housing Finance Company also extends a high value top-up loan when you transfer your outstanding balance to them. They also provide pre-approved offers that simplify the loan application process. Such offers are available on various products, including loans against property, home loans and many more.
You can use this top-up loan amount without any restriction and finance any personal or professional expense. Following the aforementioned tips, individuals can reduce their home loan EMI, regardless of the market condition. It helps them clear debt faster and ensures a smooth borrowing experience.