Home loans can put severe stress on your monthly budget if you don’t have a proper plan chalked out. Remember that your loan amount, the interest rate on your loan, and the loan tenure are the primary determinants of your monthly installment. At times, due to poor planning, you may end up paying more against your loan.
So, if you’re planning to take a home loan or already have taken one, then consider these six essential tips to reduce the interest payable.
1. Shop Around
The first and most important thing you can do to reduce your home loan interest rate is to shop around. Banks and NBFCs offer home loans at different interest rates. Research and compare the interest rates of different lenders before you zero in on one. A little effort on your part can help you save a lot of money in the long run.
2. Know Your Credit Score
Your credit score is one of the primary factors that lenders consider while approving your home loan application. A high credit score is an indication that you’re a responsible borrower and have repaid your debts on time. This increases your chances of getting a home loan at a lower interest rate. So, before you apply for a home loan, check your credit score and improve it if it’s not up to the mark.
3. Consider a Shorter Loan Term
The loan term is the period for which you’ve taken the loan. A shorter loan term means higher EMIs, but it also means that you’ll pay less interest as compared to a longer loan term. So, if you can afford it, opt for a shorter loan term.
4. Make Extra Payments
Making extra payments towards your home loan can help you reduce the interest payable. You can make these payments either on a monthly basis or as a lump sum payment. These payments will be applied towards the principal amount, and as a result, the interest payable will come down.
5. Home Loan Balance Transfer Can Be an Alternative
If you’re unhappy with the interest rate on your home loan, then you can consider transferring the balance to another lender who’s offering a lower rate of interest. This process is known as balance transfer. However, before you opt for this option, check the balance transfer fees and other charges that you’ll have to pay.
6. Refinance When Rates are Low
If the interest rates in the market have fallen from the time you took the home loan, you can refinance the loan at a lower rate. This will help you reduce your monthly repayments and save on interest. However, keep in mind that you’ll have to pay the processing fee and other charges associated with the loan.
There are many things that borrowers can do to reduce the interest rate on their home loans. Some of the most important things include: shopping around for the best deal, maintaining a good credit score, and making a larger down payment. Additionally, borrowers should try to avoid paying for private mortgage insurance, and they should get quotes from multiple lenders to compare rates. By following these tips, borrowers can save a significant amount of money on their home loan.
If you’re looking for a local mortgage lender in Columbia, MO? Look no further than Total Lending Concepts! We are a local mortgage lender offering home loan options for just about any situation. Experience a home loan application with a little TLC by getting in touch with us today!