Tips to Reduce EMI Payments on Your Home Loan
Your home loan EMIs depend on factors like tenure, type of interest rates etc. There many online home loan tenure calculators that you can use to determine the ideal tenure for your loan which minimizes your EMIs.
It will be highly beneficial for these loan seekers to know how they can save on their EMI payments by taking the following steps.
Tips to Reduce Your Home Loan EMI Obligations:
- Choose Shorter Tenure: The tenure you choose while applying for a home loan has a considerable impact on its cost. You must understand that when you select a shorter tenure, you save a lot of money on the home loan interest payment. Try to pay off your debts as soon as possible as a general rule of thumb. It will reduce your total interest payments. You can use a home loan tenure calculator to determine the best possible tenure for your loan.
- Evaluate Interest Rates: You must pay minute attention to the type of interest rate while applying for your home loan. You will have the option of choosing between a floating rate of interest and a fixed rate. A floating rate of interest is subject to market fluctuations. It may reduce or increase over time based on market trends and institutional policies. Whereas, a fixed rate of interest stays the same over the whole tenure of a loan. Therefore, you must choose the type of interest rate carefully. Typically, the floating interest rate is a few basis points lower than the fixed rate.
- Pre-Payment: Pre-payment refers to the payment a certain percentage of the loan amount earlier than the stipulated due date. It will ensure that your loan is paid off before its tenure is over. If you decide to go for pre-payment, the lender generally charges a pre-payment charge. However, if you have opted for a floating home loan interest rate, you will not be charged any pre-payment fine as per RBI guidelines for part-prepayment and foreclosure.
- Home Loan Balance Transfer: Home loan balance transfer refers to the event where you transfer your remaining loan amount to a different lender. There are many reasons for choosing a home loan balance transfer. It offers numerous benefits if done correctly. You must select a lender for your home loan balance transfer that provides a lower rate of interest. That will reduce your overall interest obligation on loan. Many lenders provide loans with borrower-friendly features like balance transfer, prepayment facilities.
- Compare Lenders: Before choosing a lender, you must carry out a thorough evaluation process to compare different lenders. Tally the benefits and additional charges along with the interest rates they charge. Then choose a lender that offers the highest benefits and lowest interest rates. That will make sure your EMI obligations come down.
Pradhan Mantri Awas Yojana (PMAY)
PMAY is a housing initiative undertaken by the government in the year 2015. It aims at building 20 Million houses by the year 2022.
The main feature of this scheme is that it is a credit-linked subsidy scheme (CLSS). Individuals who apply for this scheme are eligible for subsidized interest rates. It will considerably reduce your interest obligations on the EMIs. However, you must belong to any one of the following income groups to qualify for the Pradhan Mantri Awas Yojana for a home loan.
- Economically Weaker Sections (EWS)
- Low Income Group (LIG)
- Middle Income Group-I (MIG I)
- Middle Income Group-II (MIG II)
Follow these guidelines to reduce your EMI obligations. You can use a home loan eligibility calculator to determine the amount that is most suited based on your income.