A majority of homebuyers are forced to rely on home loans when it comes to buying property, given how expensive real estate is. However, some have second thoughts about applying for housing loans, as they are worried about getting stuck with high interest rates. But you do not have to get stuck with a high housing loan interest rate.
Take a look at a few effective ways in which you can bring down the interest rate of a housing loan:
- Try and choose a short repayment tenure
When it comes to choosing a tenure, most borrowers go for the longest tenure available. However, do keep in mind that the interest keeps getting added with each EMI payment. So, by cutting down the number of monthly installments, you are successfully reducing the interest payments towards the loan. So, if the budget permits, try to opt for a short repayment tenure.
- Always maintain a decent credit score
There is no financial institution that will approve a home loan application without first taking a look at the applicant’s credit score. This is to get an understanding of whether the applicant will be able to comfortably repay the loan on time. Most lenders require their applicants to maintain a credit score of 750 or more. Borrowers have even got better deals by maintaining good credit scores, such as a lower home loan interest rate and a higher loan amount.
- Go for a home loan balance transfer
What if a borrower has already taken a home loan a few years back and now finds a better deal? They have nothing to worry about, as they can always apply for a home loan balance transfer. This involves transferring the outstanding loan amount from one lender to another for better benefits, such as a lower housing loan interest rate.
- Make a higher down payment
A home loan can only cover up to 80-90% of the property cost, depending on the loan amount. The remaining amount will have to come from personal savings, which is known as the down payment. Now, if you are ready to make a higher down payment, it is possible to get a better loan deal, such as a lower home loan rate.
- Choose smartly between a fixed and floating interest rate
A fixed interest rate does not change throughout the loan tenure whereas a floating rate can, depending on the market conditions. A floating interest rate is usually slightly lower than a fixed interest rate. You can use a home loan calculator to know which of the two is a better fit for your budget.
Before you go ahead and apply for a home loan, make sure to keep these tips in mind. In addition, it is advisable to use a home loan EMI calculator to be aware of the loan’s EMIs beforehand. This will help in deciding whether the monthly installments of the loan are affordable or not.
