We present 5 simple ways to reduce the Home Loan EMI burden on your monthly expenses.
There are two types of home buyers – those who take a home loan and buy the house after analysing their situation, and those who are afraid to take a home loan because they fear the EMI cycle.
The monthly home loan EMI can become problematic if you allow it to be – in fact, there are ways to control and reduce it, as outlined below –
Take a lower loan amount. This is simple math – the lower amount of money you borrow, the less EMI you will pay on the monthly repayment. But this automatically means that you pay the greater part of the house’s cost out of your own resources.
Look for loans with a lower interest rate. It naturally follows that the lower the interest rate, the lower is the EMI payable on the loan. This requires some amount of research and negotiation across housing finance companies in India. But it is worth the effort when you get a home loan that has a lower rate of interest than others. Use a home loan EMI calculator when you are researching different loan companies online. The lowest home loan rate at the moment is being offered at 8.3% while the highest is above 11%, across premier housing finance companies.
Increase the tenure of the loan. A good tip to lower the EMI on the loan is to increase the loan tenure. Suppose you are opting for a loan with a tenure of 15 years and with a spread of 600 EMIs (these figures are for illustrative purpose only). If you were to increase the tenure of the loan, the number of EMIs (known as the ‘spread’) would also increase – but the EMI amount would correspondingly reduce. This is a useful option for those who are not about to repay the loan in the next 10 years, and who would like to have a more affordable EMI every month.
Pre-pay regularly. Some borrowers who are able to save money periodically choose to pre-pay additional amounts of money to the lender. This helps reduce the EMI spread, and if sufficient money is repaid to the lender (along with the monthly EMI schedule) then the borrower may even be able to get an appreciable reduction in the EMI. Besides, periodic prepayment results in overall lesser repayment to the lender – which makes the loan proposition even more affordable.
Transfer to another lender at a lower rate. Most leading housing finance agencies allow a home loan transfer from another lender. It is a good option to pursue if you find that another lender is offering lower interest rates. Use a house loan EMI calculator to find the difference in EMI if you make the switch to another lender at a reduced interest rate. Also, find out the latter’s processing fees before you initiate the transfer process.
These simple measures can help you reduce the burden that the monthly EMI exerts on your overall budget.