The Reserve Bank of India raised the repo rate by 50 basis points as per the update from August 5th, 2022. Therefore, the current rate is 5.40%. This would probably result in an increase in the most recent house loan interest rates being given by different housing finance organizations. Although it may be difficult to pay, there are several options for borrowers to lower the interest rates on their home loans.
Tips to lower home loan interest rates
1. Opting for a shorter repayment tenor
Home loans typically have a tenor of up to 30 years or more, which is significantly longer. However, the total amount of interest paid decreases noticeably if borrowers opt to stick with their desired shorter duration for repayment. However, EMIs will be increased. A home loan calculator provided by top HFCs is the greatest online tool to check expected EMIs. Based on the user’s input, this calculator displays the monthly installments in real time.
2. Reworking the EMIs annually
The majority of well-known housing finance businesses permit borrowers to adjust their EMIs annually. Therefore, people who consistently see increases in their income or wage should use this facility. This will gradually shorten the chosen duration, lower the applicable interest rate, and speed up the loan closing.
3. Availing of a balance transfer facility
By using the balance transfer option, someone who currently has a high-interest house loan can lower that rate. This tool enables borrowers to transfer their outstanding loan balance to a new lender at a substantially cheaper home loan interest rate. Additionally, they are entitled to higher credit terms and conditions.
4. Making part prepayment
Another handy way to lower interest rates is to make partial prepayments on the house loan using extra money from things like income increases and bonuses. The ability to partially prepay a loan allows borrowers to pay off a portion of the principal well in advance of the loan’s due date. By doing this, the remaining principal on the loan is reduced, which also lowers its current interest rate.
In addition to the previously listed variables, there are a few other strategies to reduce the interest rate on a housing loan before applying for it.
- Keeping your CIBIL score high ensures that you are a creditworthy borrower. On a scale of 300-900, a score of 750 or higher is considered optimal. A higher score boosts one’s chance of getting a loan approved and a lower interest rate.
- Companies that finance homes offer an LTV between 75% and 90%. The entire sum must be paid in advance by borrowers. Their need for the house loan amount decreases if they put down a larger amount. The appropriate interest rate is lowered as a result.
- Borrowers should try haggling with the lender for cheap rates if their eligibility is impressive based on numerous criteria. However, they must confirm that they have filed all required documentation that is current and authentic.
- By meeting the requirements set forth by the loan provider for eligibility, people can also increase their trustworthiness. The factors include things like nationality, age, and job history. They should also educate themselves on the elements that can affect their eligibility for a home loan.
Even after the recent hike in the repo rate, there are reputable HFCs with current home loan interest rates that are still pretty reasonable. Along with the internet application method, approaching the trustworthy one also offers special features and rewards.