How to Reduce Your Home Loan Interest Rates?

Are you looking for home loan interest? Here are some tips to lower the interest rate, how to negotiate, and why the low-interest rate matters.

There are so many people whose prime dream is to get a house they can call their home, which is their own. But not everyone can afford the cost of the house from their pocket, and they need to get a home loan! They move towards several banks and institutions that provide various loans to get a home loan.

Due to all this, loans become crucial, and the interest rate becomes even more critical for an individual. Everyone is always looking for better deals that are going to avoid creating a burden on their bank balance later.

One can get loans for purchasing a new house, land, apartment, or villa, for completing their under-construction home, to get the solar panel for their house, to repair their house, and much more. So many curious questions are running through people's minds, such as why interest rate matter to someone, how to get home loans at a low-interest rate, how to negotiate interest rates, and much more.

7 Tips to Lower the Home Loan Interest Rates

1: Short Tenures are Always the Best

The duration of tenure plays one of the most crucial roles in paying home loans. Sometimes the course of long tenures is 25 to 30 years, and one should never go for those thinking of lowering the home loan interest rates. By opting for the shorter duration of tenures, one can reduce their home loan interests and choose a tenure duration of 15-20 years.

Before signing and approving home loans, a careful reading of the papers and tenure duration is always advised. This is to avoid paying high-interest rates on home loans.

2: Go for Prepayments

Another tip to lower the interest rate is to go for prepayment on their home loans. By doing such, one will pay more than their home loan interest, and slowly, over the years, that amount will lower the principal amount. And then eventually, it is also going to reduce the rate of interest.

There are times when the lenders from whom the home loan is taken charge of a specific percentage of the prepayment, and in these cases, it is always advised to ask the lenders and to know about these from the lenders.

3: Comparison of Interest Rates Online

Before going for any home loan, one should always compare and search the interest rates on the internet. And only after that should one opt for their perfect home loans in which they have to pay lower interest rates.

One can research so many third-party websites that provide the comparison of interest rates and also show the ones that have low rates of interest.

4: Home Loan Balance Transfer as an Alternative

Another tip to lower their interest rate on home loans is through balance transfer. If someone feels like their lender is charging different interest rates, they can transfer their amount (principal) to the other bank they choose that provides them a low interest rate.

However, if someone misses the amount to pay, they have to suffer penalties, and therefore, it is advised to always go for this option of balance transfer when they don't have any other options to do and are helpless.

5: Pay More as a Down Payment

So many banks and institutions are known to provide almost 75-90% of the total value of the property that one purchases. And in this case, one only has to pay 10-20% of the total cost of that property.

However, one should always pay more as a down payment from their side, and through this, the interest rate becomes less because the higher amount one pays, the lesser the interest rate.

6: Always Look for Better Deals

If someone has an excellent credit history, it impresses the lenders, and they get easy deals, which is well known to everyone. Banks are known to provide a preferential rate to some customers with good credit scores.

One can understand this through an example: if someone has a credit score of 800 or maybe even near 800, then there will be many banks that will provide their home loans at the best rates if they seem like a responsible customer who always pays their bills and dues on time then there is a high chance that the bank will provide them with home loans at the best rates.

If this is not the case, one can also talk to banks and negotiate with them, and they may get a great deal. They can also look for festive seasons where the bank provides better deals as a festive offer during festivals.

7: Increase the EMI

Sometimes, some lenders allow individuals to look after their instalments annually. If someone goes for a job with a high salary, they can go for a higher EMI, which will lower their tenure.

When the tenure is lessened, the interest one pays also gets lessened. Following all these crucial tips and keeping these in mind while getting a home loan can benefit a lot.

Why Does Interest Rate Matter to an Individual?

Someone may wonder why an interest rate matters to any individual. Interest rates are known to influence the borrowing cost, and then eventually, it affects the expenditure in that person's business and even in that person's household. If the interest rate is low on any loans, then that allows many individuals to get their new homes or business and more by getting better interest rates.

Borrowers, if the interest rate is very high, they have to pay a considerable amount of money to borrow the amount from the lenders. That high rate of interest is going to demotivate them to borrow money.

If the interest rate is high, it also affects the debt procedure for the customers and the overall business.

What is the Eligibility for Home Loans in India?

To get a home loan, one must look at several factors and eligibility that will decide whether one will get the home loan. Home loans depend on so many aspects, such as the monthly income of an individual, the current age of that person who wants to have a home loan, the credit score of a person, the retirement age of that individual, obligations on finance, and much more.

In short, home loan eligibility is a set of factors that the banks or any institution decide whether a person is worthy to get a home loan and can repay the principal amount along with the interest rate. One can understand this more precisely through an example if any individual wants to have a home loan. The monthly income of that individual is 30,000 Indian rupees, and if that person's age is 30 years, then that person can get a loan of approximately 20.49 lakhs rupees. The interest rate will be about 6.90%, with a tenure of nearly 30 years. And that too when that person does not have any other financial obligations on other loans such as a loan for personal reasons, a loan for vehicles, or some other loans.

The monthly salary of any individual also affects a lot when they go to get a home loan as it is one of the most crucial factors that will decide whether they will be able to repay the amount and the interest rate.

4 Ways Negotiate With Banks to Get Better Deals

1: Being a Responsible Borrower is a Good Option

To get home loans with a lower interest rate, one has to prove themselves as a responsible borrower, and any accountable borrower always pays back their loans at the proper time. If someone pays back their loans late, their image as a borrower will be presented poorly, which will trouble them when they want to have any next loan.

One can do other things to have a stable and full-time job, decent credit history, repay the principal amount on time, and much more.

2: Checking the Lender's Interest Rates

Suppose someone is considering negotiating with a lender first to provide them with loans at a lower interest rate. In that case, they should research their previous interest rates and also the interest rates that they have with their current borrowers.

Lenders will only lower the interest rate if they have lowered their other borrowers. In these cases, the confidence of a borrower goes a long way, and with the help of faith, one can negotiate better.

3: Comparison of Lender's Rate With their Competitor's Rate

The next thing that one has to do is to do the proper research and compare the lender's interest rate with their competitor's interest rates. With this, one will get a precise idea about negotiating with their lender and the rates they can deal with. They will also get a clear idea about the rate of interest in the market among all the lenders.

With this, one will also know whether they will get their home loans at a higher rate than the rest of the lenders or lower rates.

4: Asking for the Rate that New Customers Get

If someone is planning to get a home loan at a better interest rate, and if they have been an ideal borrower, they can ask their lender to lower their interest rates. In the market, many lenders give their outstanding customers rewards such as a lower interest rate and listening to them.

Conclusion

Home loans can stress many people, and most of the time, the interest rate is so high that they cannot pay it at the proper times. And so, they are always finding ways to lessen the home loan interest rates. This requires good mapping and planning of the loan and payments.

One of the most common ways to lower the home loan interest rate is to opt for a tenure of shorter duration and not 25-30 years. They can also research several websites before getting to any conclusion for their home loans. Looking and waiting for some festive seasons is also one of the best ways to get a lower interest rate on their home loans.