Millions of people have used home loans as financial tools to buy their dream houses. All banks provide loans, and the interest rates are reasonable. Yet, home loans need the greatest financial commitment because they have the longest terms. Despite the reasonable interest rate, carrying a loan for a long period would likely drain most of your hard-earned cash. So, you must pay off your mortgage as quickly as possible. Choosing a low-interest home loan is another way to reduce the cost of your mortgage. This blog describes methods to lower your home loan's EMI burden before and after acquiring the loan.
Tips to save on a home loan interest rate before applying for it.
1. Comparative Research
Home loan interest rates vary from bank to bank. Therefore, relative research is necessary to find the best interest rate for your home loans. You may achieve this online by going to the websites of several banks and NBFCs. You can also go to DSAs like Financial Buddha to make things simpler, where you can find all the offerings from many banks in one location. A home loan is one of the greatest financial decisions ever, so you shouldn't take it lightly.
2. Adding a Co-Applicant to your loan application
If you intend to apply for a house loan, including a co-applicant will enable you to negotiate a lower interest rate. It will lower your overall cost of borrowing when the tenure is considered. Adding a co-applicant often results in a 0.50% reduction in the interest rate. This can also help you qualify for a house loan with a larger loan amount.
3. Boost Your Credit Score
Your credit score is the most crucial element affecting your home loan's interest rate. A borrower with good credit is always favored by lenders and approved for a house loan at the lowest interest rates. However, there is a danger that your loan application will be denied if you apply for a home loan and don't have a strong credit score. So, verifying your credit score before applying for a mortgage is crucial. If you think it's too low, take the appropriate actions to raise it. Then, if you still need to figure it out, you can write to CIBIL directly.
4. Go for Balance Transfer
A home loan refinances, commonly called a balance transfer, is a terrific strategy to lower your monthly mortgage interest payments. It can only be used for active home loans, though. If you are already paying off a home loan, you can only use the balance transfer service. But, to qualify for one, you must have a stellar history of loan payments and have held the mortgage for between two and five years.
When you take advantage of this facility, your current house loan is closed with your lender, and the remaining balance is transferred to the new lender. Most home loan balance transfers are made to lower the interest rate or to obtain more favorable loan conditions.
5. Do Pre-payment or Part-payment whenever possible:
Pre-payment or part-payment options do not affect your home loan's interest rate, but they can significantly reduce the interest you must pay. So, you can prepay your mortgage whenever you have funds, bonuses, or incentives coming. Doing this will lower the principal amount and save money you would have paid on interest.
Usually, anytime you make a part-payment or pre-payment, you have two choices: either shorten the length of your loan or lower your EMI each month. Hence, you must select one based on your needs before moving forward. All of this was about obtaining a home loan at a cheap interest rate and how to lessen the burden of your monthly payments if you already have a home loan.