Though a home loan may help one take a step closer to owning a house, this financial assistance demands years of repayment via Equated Monthly Instalments. These EMIs, if not planned well, may put a borrower under stress. Therefore, a new borrower should know the tricks to reduce home loan EMI burden before proceeding to avail the advance.
Following are a few ways to reduce the EMI burden.
5 tricks to reduce home loan EMI amount
- Compare and find the lowest home loan interest rate
Before settling with a lender, it is advisable to compare the interest rates of different financial organisations. However, lenders do not extend the lowest rates to all the borrowers.
They take note of certain terms and conditions to determine the rate. Therefore, it is smart to shortlist at least 5-6 lenders according to their terms and conditions to bag the lowest rate.
- Opt for a higher down payment
Another way to enjoy stress-free home loan repayment is to make a higher down payment. The Reserve bank of India permits financial institutions to extend up to 75% to 90% of the property value through a home loan. The remaining amount has to be paid by the borrower in the form of a down payment.
An applicant, in general, aims to pay a minimum down payment. But paying a higher amount comes with few benefits.
- A lower loan amount availed as an advance can help lower the EMIs
- It lowers the interest rates
- Increases the chances of quick loan approval
3. Share the burden with a co-borrower
It is a smart move to apply for joint home loan. Lenders consider the income of both the applicants to determine the eligibility. Also, if the co-borrower is a female, she is eligible for stamp duty concessions and can enjoy tax deductions under the IT Act. Applying for a joint home loan also helps to distribute the EMI burden between the concerned parties.
Apart from benefits like joint home loans, prominent lenders also proffer various benefits against this advance.
For instance, individuals can enjoy pre-approved offers on home loans, loans against property and other products. These offers can help expedite the loan application process. You can check your pre-approved offer by providing your name and contact number.
- Avail a loan with a longer repayment tenor
Opting for a longer loan tenure has two benefits –
- It reduces the burden of EMIs
- Longer tenor increases loan eligibility because of EMI affordability
A prospective borrower can use a home loan EMI calculator to evaluate their repayment liability and plan other expenses accordingly.
- Credit score determines housing loan EMIs
One of the most driving factors to determine home loan rate is the credit score. Before approving the assistance, lenders consider an applicant’s credit report to determine his or her creditworthiness. Anything above 750 helps get a loan against the best interest rates, which significantly brings down the home loan EMI.
However, lenders might extend housing loans to applicants with a score below 750 as well. In such cases, the interest rates are on the higher side.
The Union Budget 2022 extended some housing loan tax benefits to further mitigate the financial strain of this long-term credit facility. It states that there will be an additional tax deduction of Rs.1.5 lakh on the interest paid by one more year.
Go through these 5 ways to lower your home loan EMI stress. Remember, lenders determine several factors before approving the loan amount. The deciding factors include income, age, LTV ratio, property features, any existing repayment obligations and more. Those who fail to comply satisfactorily with these factors can face rejection.