Substantial home loan interest rates often dissuade borrowers from availing such loans. According to a survey, close to 38% of respondents claimed that the interest rates are too high. This acted as a constraint against availing home loans. Also, high property rates, along with insufficient availability of credit, constitute other factors that are deterrent to home-buying plans.
There are measures that a borrower may adopt, which would be useful to reduce the rates applicable to a home loan, ultimately bringing down the cost of such a credit. Read on to know more about this.
Measures you can take to reduce your home loan interest rates
- Less loan corpus
If your loan corpus is smaller, its home loan interest rate will invariably be less as opposed to the interest rates levied for bigger loan slabs. It is advisable to go for a larger down payment and avail a lower loan amount.
- A joint loan with female co-applicant
Lenders offer lower interest rates to women borrowers. The rates are usually 0.05% less. If the loan application is made with a women co-borrower, the reduced interest rates can be availed. Applicants typically include spouse, daughter, sister or mother in availing a home loan.
- Avail floating interest rates
The applicant has the option of availing fixed, floating and fixed interest rates. While fixed rates impart a certainty about the amount of interest that will have to be paid, floating rates generally tend to be lower than fixed rates.
Floating rates of interest are linked to the market, which makes it subject to change. If the market sentiment drops, the interest rate for home loan will also be reduced. This is also a veritable way to reduce home loan tenor and EMI. The borrower stands to benefit by opting floating rates.
Prepayment is not directly related to lowering of the interest rate. Instead, it ensures that the monthly outgo is reduced having the same effect of a lower interest rate. On prepayment, the interest rate is calculated on a lesser amount, which means that the interest to be paid will also be less. The home loan will stand liquidated well ahead of the tenure.
- Home loan refinancing
Choosing a home loan balance transfer or refinancing includes transferring an existing home loan to another financial institution. The outstanding balance is transferred to another lender for availing additional benefits. Such benefits usually include a lower interest rate. The borrower stands to derive relief in the course of the repayment process.
Before adopting any of these steps, it should also be noted that home loan interest tax benefits are also provided to borrowers. Presently, the highest amount of interest paid on a home loan eligible for tax benefit is escalated from to Rs.3.5 lakh to Rs.2 lakh.
An additional tax benefit is also provided to first time home buyers with stamp duty of the property valuing up to Rs.45 lakh. The borrower should factor in the advantage that such tax benefit may bring, and accordingly decide whether to adopt any of the measures.
Individuals who enjoy an impressive CIBIL score can also approach their lender and ask for interest rate reductions on their home loan.
Housing finance loan from reputed lenders offers tenor of up to 30 years along with balance transfer facility. The eligibility terms include the age limit, with a minimum CIBIL score of 750.
Bajaj Finserv brings already-approved offers that make the loan application process simpler and quicker. You can check your pre-approved offer by providing a few details such as name and phone number.
By adopting the above-mentioned steps, the borrower will be able to decrease the interest payment of home loans in India. Refer to leading financiers to avail a loan at the most beneficial terms and features.
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