A home loan is usually a long-term and high-value credit. Whenever you avail a home loan, it is the repayment tenure and the interest rate that have the biggest say in the EMI calculation. Considering the high value of home loan, even a slight alteration in interest rate can have a major impact on the monthly EMI, and overall cost of the loan. Furthermore, if not paid heed to in advance, a high home loan interest rate can put a lot of stress on your budget, often leading to defaults.
The first thing you can do in this regard is to opt for a home loan provider that gives you the best interest rate deal. However, that’s easier said than done. There are multiple factors involved in deciding which home loan deal is better than the others. Let’s go over some of the ways in which you can get the best interest rate for your home loan, and reduce your EMI burden as a result.
Opt for a shorter repayment tenure
The tenure of the home loan is counted amongst the biggest factors responsible for the overall interest payable on the loan. Although longer tenures, for instance 25 to 30 years, can cut down your monthly EMIs significantly, shorter tenures of 10 to 15 years can reduce the total interest payable on the loan. You can ascertain this easily through a home loan EMI calculator.
Carry out online comparisons
It goes without saying that you should do your share of due diligence and compare the home loan interest rates offered by multiple lenders, before opting for any of them. There are many reputed third-party websites like GoSahi.com which can give you a clearer picture on different fees and interest rates charged by different lending establishments. Hence, ensure that you carry out thorough comparisons between different home loan offers, before opting for any of them.
Keep your credit score in good shape
There is a popular misconception in the market that credit score doesn’t have much say when it comes to home loan eligibility criteria, as compared to its relevance in granting of unsecured credits. Although there’s slight credibility to that statement, considering that lenders are comparatively lenient in home loan approvals for people with a low credit score, but borrowers don’t realize that these lenders more than make up for their generosity by charging a higher home loan interest rates. Therefore, if your credit score is under 750, the home loan interest rate offered to you might be considerably higher than the market rate.
Make use of home loan interest rate subsidies offered by the government
Government initiatives like MahaRERA Act and Pradhan Mantri Awas Yojana (PMAY) have proven to be very good catalysts in the growth trajectory of real estate sector over the past few years. PMAY in specific has made home loans highly affordable for people belonging to MIG and EWS sections of the society. Using this scheme, one can get a home loan interest rate subsidy of up to 6.5%, with a repayment tenure of 20 years. As a result, one can avail subsidy ranging from ₹ 2.2 lakh to ₹ 2.65 lakh depending upon their economic category.
Be careful when selecting between floating and fixed home loan interest rate
Normally, the floating home loan interest rate is a few percentage points less compared to the fixed rate. In addition, RBI has also been regularly cutting down the repo rate, thereby making it highly beneficial for people who had availed floating rate deals.