Home Loan

How to reduce your Home Loan EMI?

  • August 4, 2021
  • 3 minutes read

Owning a house is a dream come true for everyone. When ownership of a house comes along with the responsibility of repaying a home loan, one is always on the lookout for opportunities to reduce home loan EMIs and pay off the loan faster.  

Reduce the new home loan EMI that you are going to opt for 

Pick the best lending institution as per your requirement 

Home loans are a long-term commitment. All major banks and Non-banking Financial Companies (NBFC) offer home loans. Get a clear idea of the lender’s history and the terms of repayment. Pick the best lending institution that will approve your home loan and has a great customer support team. 

Pick the right home loan plan from the lender 

Each bank/lending institution offers a variety of home loan plans. Each plan is designed to cater to a segment of people. Choose the right home loan plan that is tailored for you. Picking the right home loan plan is half the battle won.  

Make larger down-payment 

Banks offer only 80% of the property value. The remaining 20% has to be paid by the home loan applicant from his pocket. This is termed as down-payment for a property. If you have funds available to accommodate more than 20% down payment, make a larger down payment. This will reduce the home loan amount you will require, which in turn reduces the EMI. 

Opt for a step-down/step-up plan 

Some lending institutions have the option to step-down and step-up in home loan plans. Step-down plan means paying lower EMI at the end of the loan tenure. This is beneficial for those nearing retirement. Step-up plan means paying lower EMI at the beginning of the loan tenure. This is beneficial for young earners in their initial years of employment. As the young earners progress in their careers and their income increases, they are capable of paying higher EMIs to close their home loan faster. 

Step-down and step-up plan is a feature of home loan plans. 

Reduce your existing home loan EMI 

Here are some easy-to-implement ways to reduce your home loan EMIs no matter which bank you have taken it from, or, are in which year of loan repayment. 

Switch from fixed rate of interest to floating rate 

If you have taken a home loan with a fixed rate of interest throughout your loan tenure, you can contact your lending institution and change it to floating rate of interest. floating rate of interest for home loan fluctuates as per the market scenario. When the base rate offered by lenders changes, it automatically changes the floating rate of interest. 

Floating rate of interest for loans are generally 1-2.5% lower than the fixed rate of interest. Since home loans are long-term loans, even a small deduction in the interest rate greatly reduces the overall EMI to be paid. So, if your home loan is under fixed rate of interest, contact your bank and place a request to change it to floating rate of interest.  

Your lending bank’s home loan interest rate has reduced but your home loan interest hasn’t? 

If your lending bank is offering low rate of interest for home loans as per it’s revised circular, it is applicable only to new loan applicants. For existing home loan borrowers, the rate of interest at which the loan was sanctioned is the percentage that will be applicable. EMIs are calculated as per the rate of interest mentioned. 

Communicate to your bank to apply revised lower rate of interest 

 Some lending institutions have a clause in their home loan agreement that states that the customer has to furnish a written request to apply lower rate of interest as and when it changes. If your home loan documents have this, then please provide a written request to your bank manager to apply the lower rate of interest to your home loan.  

Transfer home loan to a lender who offers a low rate of interest 

Though floating rate of interest is applicable to all the banks and will be applied to all the home loan borrowers, the rates vary from one bank to another. This means that some banks offer lower rate of interest. If you find a bank or a lending institution that offers lower rate of interest than your existing lender, you can choose to transfer your outstanding loan balance to the bank that offers lower interest rates. 

However, it is a wise move to take into consideration all the other fee/charges that are levied apart from the interest rate. Calculate the EMI and overall loan amount to be repaid if you opt for another lending institution. Compare the difference between both and the amount of money you will save if you switch to another lender. Only if your total loan amount (inclusive of all the charges, taxes, fees, etc.) is less than your existing lender, opt for a home loan balance transfer

Now that you know how you can lower your home loan EMIs, what are you waiting for? Click the button below to compare home loan plans and choose the one that works best for you. Want a direct representative to help you through, click on the chat option to chat with us and we’ll help you get the right home loan plan that will give you lower EMIs. 

Written by: Marketing Fincity

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