Most of us want to own a house where we can start a family and live life peacefully. The building or purchasing of a home requires a significant amount of investment. To purchase your dream home, you need to rely on home loans with a low rate of interest to address your finances. The principal amount of your home loan is relatively higher than a car loan or a personal loan. Thus, you must apply for a home loan after calculating your EMIs on a house loan calculator. In this article, you will know about How to Reduce Your Interest Payment on Existing Home Loan.
After checking your eligibility and your home loan EMIs with the help of a home loan calculator, you can implement these tips to reduce your interest payment on your existing home loan.
- Maintain a high CIBIL Score
You must maintain a good credit score for availing a lower rate of interest on your home loan. The minimum CIBIL score is 300, while the highest is 900. You need to have a minimum of 750 scores for availing a home loan. The borrower who maintains a good credit score enjoys a lower rate of interest on the home loan. The poor credit score bearer might be liable for a higher rate of interest.
- Higher down payment
You can make a higher down payment while obtaining the home loan. The down payment amount holds significant importance while deciding the number of EMIs and its principal amount. Lower down payment means higher EMIs and higher interest amount.
- Home loan prepayment
If you have an opportunity to prepay your home loan, then you can avail significant benefits and a lower rate of interest. Prepaying the loan before the end of its tenure can reduce the overall interest payments. All you need is to pay a small amount of prepayment charge for repaying your home loan.
- The annual increase in home loan EMIs
With the increase in your net income every year, you can choose to increase your EMI amount by a small percentage. This will help you to save on annual interest. This increase in percentage must be determined based on the rise in the person’s net income.
- Extra EMI payment
You can even pay extra EMI payment in case you receive any annual bonuses. By paying the other EMI you can, not only save interest but also repay the home loan faster.
- Switch to MCLR
In April 2016, the home loan guidelines introduced a marginal cost of funds-based lending rate commonly known as MCLR. In MCLR, the borrower can benefit from changing the interest rate. The home loans taken before April 2016 are subjected to tax. You can switch to MCLR by paying just a small amount of conversion fee on your outstanding loan amount. It is recommended to perform a cost analysis to find out if switching to MCLR is beneficial to you or not.
Lastly, for availing a lower rate of interest try to select a shorter tenure for your loan, which helps you to repay the loan quickly.