A home loan is one of the most common ways that can help an individual to buy a house. With the expensive real estate prices, most homebuyers cannot do without the financial support of a home loan. However, while this loan does provide the funds for a property purchase, some people are unsure whether this loan can be relied on. This is because they worry about facing financial complications when it comes to repaying the loan.
Now, while it is true that some borrowers have faced problems in clearing their home loans, it is often because their loans have high interest rates. However, this does not mean that everyone gets stuck with a high home loan rate. There are many ways in which one can ease their EMI payments by lowering the housing loan interest rate.
Read on to learn more about the ways in which borrowers can lower their home loan interest rate:
- Keep your credit score above 750
Every lender checks their applicants’ credit scores before approving loan applications. If the applicant’s credit score is too low, the lender might reject their loan application. Not paying bills and defaulting on loan EMIs can cause your credit score to take a hit. It is better to always maintain a credit score of 750 or more, as this can help in lenders offering a low home loan interest rate too.
- Try for a higher down payment
A home loan can cover up to 75-90% of the property cost. Beyond this, a borrower will have to take care of the remaining amount himself or herself. This is known as the down payment. For a lower interest rate, it is better to try and place a higher down payment. A higher down payment reduces the lender’s risk, which is why they can offer a lower home loan rate.
- Clear the loan in a shorter repayment tenure
Most borrowers opt for long repayment tenures, as it is easier to repay the loan in smaller monthly instalments. However, since the interest is added with each monthly instalment, it is best to choose a short repayment tenure to reduce save on interest payments.
- Transfer your home loan to a new lender
Some borrowers have already taken a home loan and are now looking for a better deal. In such cases, one option is to go for a home loan balance transfer, which involves refinancing your home loan from one lender to another. One of the most common reasons for a home loan balance transfer is the lower home loan balance transfer interest rate.
Therefore, these are a few effective ways in which one can bring down the interest rate of their home loan. Before you go ahead and apply for home loan, it is also advisable to make use of a home loan EMI calculator. This calculator is a tool which is available online that helps in displaying a home loan’s monthly instalments. Based on the calculator’s results, decide whether to take the deal or look for a loan with a lower interest rate.
