Home Discover Journals How to Reduce Home Loan EMI

How to Reduce Home Loan EMI

By Finserv MARKETS - Feb 23,2019
Views Icon717 Views 0 0 Comments

How to Reduce Home Loan EMI

The purchase of your dream home takes a lot of hard work and consideration. Many working individuals save up for years before they’re able to pay the down payment on the house of their dreams. Given the rising cost of real estate, most people resort to taking a home loan to be able to buy the property that they’ve got their hearts and eyes set on.

However, the repayment of a housing loan can be a time-consuming process, which could take up to 20 years. This translates into a well-spaced out EMI repayment schedule, which could drastically impact your monthly budget and might even affect your standard of living. Luckily, there are many things individuals can do to reduce their home loan burden.

Most importantly, it’s vital to identify the right financial institution that offers competitive interest rates, a manageable tenure and a fair EMI amount. Let’s take a look at the convenient ways in which you can decrease your home loan liability.

Reducing Your Loan Burden

Affordability plays a significant role in the selection of a home. Even with the help of a home loan, people often have to shell out personal savings to be able to enjoy the freedom and peace of mind that comes with owning your own property. Given the financial considerations, it’s important to carefully prepare a plan to reduce your borrowing burden and keep your finances as stable as possible. The following are some of the ways in which you can reduce the debt burden of home loans:

Premature prepayment: Prepayment works as an effective tool to reduce your loan burden. Borrowers can save interest if the prepayment process is commenced from the very first year of the tenure. Prepayment at later points is not very financially beneficial.

It’s also important for borrowers to educate themselves on the floating rate of interest available when applying for a loan. With a floating interest rate, there is no prepayment charge. Additionally, when you’re making a prepayment, ensure that the value equals the value of at least 2 EMIs. Remember, your EMI comprises of two components – part of the initial principal, as well as the interest that is levied on the loan amount. During the initial years of repayment, individuals pay more towards the levied interest and less towards the principal. Hence, part prepayments during this time help reduce the principal and thus bring down the total interest levied. Home loan part prepayment should not be confused with home loan down payment.

Make a bigger down payment

  • The bigger down payment you make, the lesser will be the repayment burden in the long term. Also, financial institutions can finance up to 80-90% of the property’s value. The remaining amount has to be paid as down payment while purchasing the property. If you make a higher contribution as down payment, you will need a comparatively lesser amount as a home loan. This will not only enhance your loan eligibility but also lower your Loan-To-Value (LTV) ratio. The LTV ratio is the ratio of a loan to the value of the property being purchased. Lower your LTV ratio; higher will be the chances of your loan approval.
  • Another advantage of making a bigger down payment is that when you avail a home loan, you will be able to get rid of the debt sooner. Also, it will help you reduce home loan EMI, and you won’t have to strain your finances to pay the monthly installments. So if you are looking forward to ways regarding how to reduce home loan EMI, making a bigger down payment can prove to be an ideal option.

Excess payment over the EMI

At times when you have additional savings or when you receive a bonus in the office, you can use the funds to pay a higher amount towards your loan repayment. By slowly paying larger chunks of the amount, you could end up reducing your loan tenure.

Proper timing of EMI

It is always advisable to pay your EMIs within a week of receiving your salary. This way you can avoid any charges due to non-payment of outstanding dues.

Select a short tenure

Ideally, a shorter tenure is preferred as a longer loan tenure translates into a higher interest payment. You should carefully think about the maximum EMI you can afford to pay every month and choose a tenure accordingly.

Opt for a home loan balance transfer

One can opt to get the housing loan refinanced from another lender, if they feel that the rates of interest bring offered by the current borrower are too high.

These tips can help you considerably reduce your housing loan burden. But, to be able to alleviate the loan burden effectively, it’s important that you do some research before applying for the loan and select the correct lender, who offers competitive interest rates, and affordable EMIs.

Apply For Home Loan Balance Transfer

With Finserv MARKETS, applying for a Bajaj Finserv Home Loan is easy, convenient and completely hassle-free. What’s more? There is a host of features and benefits that you can avail to turn your dream owning a house into reality. So why wait? Get your home loan with us, today!

“Finserv MARKETS, from the house of Bajaj Finserv is an exclusive online supermarket for all your personal and financial needs. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!”

Comments

Connect with Us
Connect with Us

Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522