Most individuals dream of having their place someday. Buying a property today is no easy feat, considering how high real estate prices are. Many people rely on home loans to arrange the funds to buy houses. While a home loan provides the financial assistance needed to purchase a property, some borrowers still worry about facing difficulties repaying the loan. This is often because the housing loan interest rate is too high.
However, being stuck with a high-interest-rate home loan can easily be avoided. You can effectively make the EMI payments much more accessible by getting a lower interest rate on loans.
So, take a look at four effective tips that can help in bringing down a home loan interest rate:
1. Opt for a home loan balance transfer
If you have already taken a home loan and now find much better deals, do not worry, as this does not mean you have missed out on them. If the home loan rates are lower than your current plan’s, opting for a home loan balance transfer is always possible. This involves transferring the outstanding loan amount from one lender to another. Many borrowers choose to share their home loans for lower interest rates, as even a slight difference in the rate can make quite the difference in the loan EMI payments.
2. Try for a higher down payment
A home loan does not cover 100% of the property cost. The loan can only cover up to 80-90% of the property value. The rest needs to be protected from personal savings, called the down payment. Now, if you are ready for a higher down payment, this reduces the lender’s risk, and they can offer a lower home loan interest rate.
3. Choose a short tenure to repay the loan
Most borrowers choose long repayment tenures because the monthly installments are easier to pay. However, remember that the loan’s interest keeps accumulating with each installment. This means that cutting down the number of installments can help save money on the loan’s interest payments.
4. Maintain a strong credit score
Any lender will check the applicant’s credit score before loaning. Now, lenders always prefer borrowers with good credit scores (750 or more) and provide better deals. For instance, a borrower with a good credit score can get a higher loan at a lower home loan rate.
Therefore, these are some helpful ways to reduce your home loan’s interest rate. Use a home loan EMI calculator to determine a loan plan’s monthly installments beforehand. This will help decide whether the interest rate offered by the lender is an affordable option.