Unless you are a first-time homebuyer, your mortgage loan burden is always on the upper side. You should pay the interest in a scheduled manner and on time to avoid further charges from the lender. Getting committed to a home loan is a test of your money management skills, and if you are not aware of some tricks and tips to save money on home loan repayment, it is hard to reduce your loan expenditure and manage your finances. Besides, remember that taking a home loan teaches you to save money using tax saving schemes with a positive outcome that you get the accomplished feel as a proud homeowner once you repay the home loan and boost your confidence in handling finances!
If you want to apply for a home loan but have difficulty choosing housing agencies/banks, you can approach one of the reputed Chennai builders who will help you take a home loan with lower interest and speed up the process. In 2022 the housing loans alone amounted to around 2000 billion Rupees in India https://www.statista.com/statistics/1201678/india-housing-loans-before-and-during-covid-19-pandemic bouncing back to the pre-Covid levels, which shows a sharp rise in people taking home loans recently despite the longer tenure and higher interest rates because buying house has majorly become a full-fledged investment with competitive home loan interest rates.
Although you are familiar with a home loan and have already taken one there is always something new to learn, as home loans are dynamic and affected by changes in the laws, amendments, changes in bank policies, Chennai real estate market, and age, income, longer tenure, higher interests and many other such factors making them a significant financial commitment with high consequences in case of failure of payments and having up to date knowledge help you apply for the apt one and even save a large chunk of money on home loan repayment.
Here are some tips on how to save money on home loan repayment from real estate experts.
1. Analyse the Choices of Home Loans!
Everything needs research while buying a home, and home loans are no exception. It's not only the interest rates you should focus on but also the convenience charges, processing fee, etc., which differs between the banks and private lenders. However, never compromise the reputation of the lenders by saving these extra costs. Researching the banks, interest rates, and other charges are those tactful money saving tips help choose the best among the rest!
2. Pay a Larger Down Payment!
A larger down payment means a lesser home loan (please note the term has been used here already in a shuffled manner) amount, which you can pay off in a shorter term and save on total EMI (Equated Monthly Instalment). The monthly EMI you pay for a small loan amount is less. The amount taken as a home loan is the major factor that affects the EMI rates.
Ø Lesser down payment à Bigger Home loan amount à Higher EMI
Ø Higher down payment à Smaller Home loan amount à Lower EMI
Also, when you go for best home loan rates, you can save from the interest amount and will not have any cash burden when you repay the borrowed amount at the end of the loan term. Besides, you should remember that paying off the debt earlier is not encouraged and penalized by some of the banks, just like a late payment past the loan tenure. You should check the best saving plan with the banks while applying for a home loan.
Home Loan EMI Rates Per Month
|
Loan Amount (Rupees) |
Interest (Percentage) |
Tenure (Years) |
EMI (Per Month in Rupees) |
|
69,28,608 |
9.16% |
20 |
63,053 |
|
1,57,80,506 |
8.98% |
20 |
1,41,778 |
|
2,08,38,734 |
9.2% |
18 |
1,97,754 |
|
3,47,48,861 |
8.69% |
20 |
3,05,750 |
(This is an Indicative Example; this may vary upon time and bank)
3. Negotiate your mortgage loan interest!
Although the bank hardly reduces interest rates based on individual requests, you should give it a shot, and with this, you can save a lot on interest. Remember, banks love loyal customers, long-term relationships, and excellent credit scores, and while taking home mortgage loans you should use the credit standing to your advantage. Speak with your bank relationship manager about reducing your new home loan interest rate, and who knows, if the bank is satisfied with your credit score, they may reduce your payable monthly EMI.
You can also ask the lender to restructure the home loan so that you can pay a little higher interest and reduce the loan tenure. In that way, you can reduce the financial requirements for home loan EMI for the loan you have taken.
4. Make a Partial Payment on Home Loans!
When you take a home loan reducing the principal (home loan amount) should be one of the objectives along with the interest amount. Part-payment of home loans is paying off a large part of the whole amount before the tenure, significantly offloads a part of the principal amount, saving investments, reduces interest payable from there, and even improves your credit score. Partial repayment of home loans lets you achieve lesser EMIs, shorter tenure, and lesser burden on home loan repayment at the end of the term.
5. Reduce the Tenure/Increase EMI Payable!
Banks offer the flexibility to change the term and interest amount. Shortening the loan duration and increasing the EMI amount will lead to faster repayment and lesser interest paid. However, readers should not confuse this with selecting a home loan with lower interest while applying for a home loan. During the course of the loan, you can change (increase/decrease) the home loan term. With these saving ideas, you will pay a little extra on the EMI every month, but the total EMI is lesser as the duration gets shortened.
6. Transfer Your Home Loan Balance!
You can consider a Home loan balance transfer when your lender refuses to reduce EMI during the course of the home loan. Transfer the home loan balance to another bank that offers lower interest rates for the rest of the duration. Find a reputed bank that offers home loans for the first-time buyer with attractive interest rates and minimum/zero transfer charges for a higher CIBIL score. With this, you can also reduce tenure for the outstanding loan.
Home Loan Balance Transfer to Reduced EMI and Annual Savings (place it in H2 Tag)
|
Home Loan |
Tenure |
Existing Interest Rate |
Existing Monthly EMI |
Revised Interest Rate |
Reduced Monthly EMI |
Annual Savings |
|
79,40,253 |
20 Years |
9.64% |
74,741 |
8.06% |
66,712 |
96,348 |
|
3,44,95,949 |
20 Years |
9.64% |
3,24,708 |
8.06% |
2,89,827 |
4,18,572 |
(This is an Indicative Example; this may vary upon time and bank)
Key Points
Ø Having this money saving plan on home loan repayment allows you to make informed loan choices.
Ø You should pay home loan EMIs and principal on time and within the duration to avoid hefty fines from the lender hence need thorough research before taking any home loan.
Ø Make the maximum down payment for the property purchase to minimize the home loan amount.
Ø Talk to your lender to reduce interest rates and restructure loan duration if you get a hike in your salary or any other possible incoming fund so that you can repay the debt faster.
Ø Your yearly bonus or any windfall gains should go for part payment of home loan, as this will significantly reduce the financial pressure from the EMIs, and can reduce the loan duration sooner for you to become debt free.
Ø You can reduce home loan tenure with any bank if you can make space for a little extra interest payment. Reduced tenure means reduced total EMI.
Ø Transferring your home loan to another bank offers lower interest for the outstanding loan amount and is a great way to save money on home loan repayment.