Home buying involves a large sum and that is not the cup of tea of everyone to have at one go. In fact, when taking a home loan, individuals need to engage in necessary financial planning as the down payment is also considerably high. And in order to provide a major benefit to end borrowers, the RBI time and again takes steps such that rate cuts in the economy are transmitted to individuals as it is in haste and transparent manner.
In its this attempt, the RBI is emphasizing the introduction of external benchmarking for different loan products and amid it, SBI is the second bank after Citibank to introduce external benchmarking linked home loan product i.e. repo rate linked.
Also, the launch of Real Estate (Regulation and Development) Act, 2016 has brought about greater transparency and booster the sentiments of home buyers. Also, even as the reset period on most of the home loans is after a period of one year, one can take the following steps to lower their interest payments or outgo on a home loan.
Here are the 3 steps:
1. Do substantial research on rates: Home loan is a longer tenure loan and as the interest outgo too will be large, you need to do all possible research and check the interest rates on offer by different financial entities. Different sites provide a summary of the interest rate charges, the fee as well as other charges. Always, make it a point to read the fine print of your loan documents.
2. Opt for home loan overdraft facility: The feature enables home loan borrower to deposit any surplus money that he might have in hand to deposit over and above the EMI amount towards his home loan account. And this deposit is considered as pre-payment until the time you make the withdrawal. And depositing any such amount tends to lower both your interest payment on the outstanding loan amount as well as the loan tenure. Also, there is a provision that allows an individual borrower to deposit this surplus fund from the bank account.
3. Before the end of loan tenure, make pre-payments on a regular basis: It may be the time when you are in receipt of your increased salary with arrears and this can be put to repay the loan and hence you can be able to service the debt faster and reduce your overall interest payment on the loan.