Home loan

Sobha: How to lower the interest rate of his mortgage?







Buying a home is an aspiration for most people and is one of the most important financial decisions one can make. Usually, people turn to a home loan to make that dream come true. A well-managed loan makes a life goal easily achievable and is a preferred option, even if you have the funds to buy a home without the loan. Benefiting from a home loan offers a bunch of tax advantages. However, you might end up paying more EMI due to rising interest rates on home loans.
If you’re about to take out a home loan, there are a few things you should keep in mind. The first is your eligibility criteria, based on your income and repayment capacity. The other factor would be the cost of your home loan, which includes application fees, administrative fees, prepayment fees, etc. Also, an important aspect is the duration of your mortgage, which can be sanctioned for a maximum period of 30 years, depending on the eligibility of the client.
But is there a way to lower the interest rates on your home loan? Yes there is! Here we list some of the most foolproof methods to ensure that you pay lower home loan interest and don’t end up burning a hole in your monthly budget.

10 Ways to Lower Home Loan Interest Rate

Reducing the interest rate on your home loan is not a tedious task. Here we have mentioned all the points you can implement to save your hard earned cash.

  1. Maintain an excellent credit rating: –

    Your credit score reflects your degree of responsibility with borrowed money. A score of over 750 is considered good as it suggests good financial health. Lenders would assess you as a reliable borrower and offer you better interest on a loan. If you have a bad credit score, it could very well be due to late or missed payments. To improve your credit score, keep track of your payment history, how much you owe, how long your credit history is, new credit, and types of credit used.

  2. Make a larger down payment, reduce the loan amount:-

    A planned approach towards buying your home will be beneficial. You can strive for a larger down payment and then reap the benefits of a smaller loan amount with significantly lower interest. Most banks and financial institutions finance between 75% and 90% of the value of the property, depending on the eligibility of the borrower. Plan accordingly and be sure to borrow less so you can pay less interest.

  3. Decrease the duration of the loan: –

    The term of your loan is one of the main factors responsible for the amount of interest you will pay. Although your EMI may decrease for longer terms, you will end up paying more for interest. However, if you opt for shorter terms, your EMI may be slightly higher, but your overall interest payable will decrease significantly. Therefore, you should choose a tenure carefully before availing a home loan.

  4. Compare interest rates online:-

    Do thorough research and compare rates before finalizing on a lender. Many third-party websites can provide you with comparisons that will provide a clearer picture of all charges that will be levied. It is ideal to have a thorough knowledge of the home loan interest rates of all the banks before choosing the right one for you. In addition, banks offer preferential rates for existing customers or those with a good credit history. If your credit score is close to 800, you can get better rates.

  5. Choose floating interest on your home loan: –

    A floating interest rate moves up and down with the rest of the market or other benchmark interest rates, as opposed to the fixed interest rate. As it is directly dependent on the market, it is generally 1 to 2% lower than the fixed rates offered by the same lender. That’s why some borrowers find it attractive, because lower interest rates mean saving more money each month. Even if there is a situation where the variable rate exceeds the fixed rate, borrowers need not worry as these conditions are temporary and will not impact the entire term of the loan.

  6. Make regular prepayments:-

    Making periodic prepayments is one of the surest ways to ensure a reduction in total interest. The EMI that is paid has two parts – one is the interest charged on the borrowed amount and the other is the principal. In the early stages of your loan term, you pay more for interest and not as much as for principal. If you get a raise or a bonus or a salary increase, you can use it to make an advance payment. This will reduce the principal and therefore the interest as well.

  7. Review EMI every year:-

    You can review your EMI annually with some lenders. If you get a raise or consistently see an increase in your income, then you may choose to increase your EMI. It may seem strange at first, but the higher your EMI, the shorter your term and therefore you will see a significant reduction in your interest rate.

  8. Refinance your home loan:-

    If you think your current lender is not giving you favorable terms, the first step is to contact the existing lender to lower your rate. Most lenders will try to keep their good customers and can oblige. You can ask the bank to match a competitor’s interest rate, or you can ask them to lower the interest rate based on your credit history.

    Then you have the option of transferring the loan to a new lender. All you have to do is find another lender that offers interest rates that suit your needs and also check what other fees they would charge. You can then submit an application to your current lender and obtain the necessary documents, then head to your new lender to process KYC and other procedures. The new lender will then implement their procedures before approving it for you.

  9. Take a long-term home loan and start a SIP:-

    Choose the smart way and make a systematic investment plan (SIP) in mutual funds equal to 10% of the monthly installment amount, you can recoup the full cost of the home loan. If you take a home loan of Rs. 30 lakh for 25 years at an interest rate of 6.75%, your EMI would be Rs 20,727. After 25 years, you would pay Rs 62,18,204 for the sum borrowed from Rs 30 lakh. Now, if you invest a month SIP of Rs 2000, or 10% of the EMI, then for the same period of 25 years, you get Rs 65.7 lakh, estimated at 15% return per annum. This way your loss can be reduced to zero.

  10. Do not skip payments:-

    If you don’t pay your EMI for three months, lenders may consider you a defaulter and take action against you. The lender will send a notice that you must pay your debt by a certain date or you may lose possession of your security. A single default is enough to lower your credit score by at least 50 to 70 points. If your income is interrupted, you can go to the lender and ask for an EMI-free period. Banks offer a three to six month waiver on EMI payments if you are between jobs or if your business operations have been suspended.

Conclusion

The points mentioned above have covered everything you need to know about reducing your home loan interest rates. Apart from this, another important aspect is to maintain a consistent and long-standing work history. Lenders are likely to favor those who have worked in the same place for many years with a steady/increasing income. Conversely, an erratic work history will make lenders reluctant to approve your home loan. In fact, before processing your loan, a loan officer will verify your employment status. If you change jobs or quit during the closing process, it will likely affect your home loan approval.

Owning a house is a dream for everyone, and hence home loans have become an essential and inevitable part of our lives. Right now, home loan interest rates are at rock bottom and now is the perfect time to take advantage. If you have already taken out a home loan, it is ideal for you to switch to a lender offering lower interest rates. Paying off a home loan is one of life’s longest commitments. A systematic and planned approach to availing and repaying a home loan is the perfect way to lead a stress-free life.

Now that your ready look is taken care of, you can check out some of SOBHA’s projects in different cities, which are sure to give your opulent lifestyle a boost!

Check Out For- Bangalore Apartments | Apartments in Chennai | Apartments in Gurgaon | Kochi Apartments | Gift City Gujarat Apartments | Thrissur Apartments

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Sobha limited published this content on February 24, 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unmodified, on February 24, 2022 12:01:08 UTC.

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