Home Loan EMI- Here are Some Tips to Reduce Home Loan EMI Burden

A home loan is a great way to get the house of your dreams. It is a popular vehicle for financing your real estate purchase due to its low interest rates, longer tenors, and appealing offers. However, when it comes to repaying your home loan, you must be prudent about your monthly outlay. If not properly planned, home loan instalments (also known as EMIs) can put undue strain on your monthly budget and raise the cost of your loan. If you are considering or have already taken out a home loan. Take a look at these simple tips to reduce the burden of home loan EMI.

Increase your down payment

As a home loan, financial institutions can finance up to 70%-75% of a property's current market value; the remainder must be borne by borrowers in the form of a down payment. The Loan to Value (LTV) ratio refers to the amount that a lender finances. A higher down payment, as a general rule, means a lower loan principal, effectively lowering the monthly EMI outgo. Furthermore, if you apply for a loan with a lower LTV, your home loan eligibility will instantly increase because the risk of the borrower defaulting is significantly reduced.

Consider a long tenor

When you have the lowest interest rate after the hike and find it difficult to pay increased EMIs after future rate hikes, it may be worthwhile to ask your lender to extend the loan tenure and reduce your EMI. The lender typically allows the borrower to extend the term until the age of retirement, which is typically 60-65 years. So, if you are 35 years old and have a loan with a term of 20 years, you can get it extended to 25 years, which will end when you reach the age of retirement, which is 60 years.

Split the EMI payment with a co-borrower

If your monthly expenses are likely to put a strain on your finances, consider applying for a joint home loan. If the borrowers are co-owners of the property, the income of both co-applicants is taken into account when determining loan eligibility. Furthermore, female co-borrowers in certain states can take advantage of stamp duty concessions that are tax deductible under the IT Act. Furthermore, some lenders may offer lower interest rates to female co-owners. Leading housing finance companies (HFCs) help to expedite the loan application process by providing customised pre-approved offers with minimal documentation required for approval. These discounts are available on products such as home loans and loans against property. You can check your pre-approval status.

Think about switching lenders

If you believe that the current interest rate charged by the financial institution is too high, you can consider a home loan balance transfer. Interest rates are at an all-time low, so by transferring the remaining principal to another lender at a lower interest rate, you may be able to save significantly over the term. When the interest component of the EMI is greater than the principal amount, refinancing a home loan can be extremely beneficial. However, before making the switch, compare interest rates thoroughly and calculate how much the difference affects your monthly EMI repayments. This will enable you to reap the benefits of calculating EMIs prior to taking out a loan.

Negotiate a lower rate with a better credit score

If they do not have a good credit score, many borrowers are forced to take out a home loan with a higher interest rate at first. However, if you have been diligent in repaying your home loan, now may be the time to reap the benefits of your efforts. You can ask your current lender to adjust your home loan rate because your credit score has improved and you may be able to get better market rates. Previously, many top lenders who would not have offered you a loan due to your poor credit score may have looked favourably on your application.

Partial prepayment, If tenure extension is not possible

If the tenure of your home loan has already been extended up to your retirement age, there is little room for further extension. The only option left to help you reduce your EMI is to pay off a portion of your home loan. Because the majority of retail home loans are taken on a floating rate basis, there is no penalty for partial prepayments. If you have any investments, such as fixed deposits, that provide a post-tax return that is significantly less than the effective interest rate of your home loan after tax benefits are taken into account, it may be worthwhile to prepay your home loan and reduce your EMI.