Ways to reduce your Home Loan

5 tips and strategies that can help you reduce your home loan burden

Home loans are long-term loans. This means you remain indebted to your lender for a long period, generally up to 25 years. The stress of repaying the loan lasts as long as the loan does. Moreover, lenders charge penalties if the loan EMI (equated monthly instalment) is not paid on time, over and above the interest you are already paying. As such, it’s important to ensure that the loan is repaid on time. You need to devise certain strategies that can help reduce the overall burden of the loan – the interest rate, the EMI and so on. Here are some tips and strategies on how to reduce home loan burden in general.

1. Start with researching well
   Research is the first and the most basic way of reducing the burden of any loan. If you are a first-time borrower, doing research can seem a bit intimidating, but there’s hardly any information you won’t find on the Internet. A basic search can help you find out everything related to the home loan – from the lenders offering the lowest interest rates and highest tenures, to those charging fixed or percentage processing fees. Detailed research can help you determine the overall cost of the loan even before you approach the lender, which in turn can help you understand how you can reduce home loan.
2. Opt for long tenure loans
   Paying your EMI on time without defaulting is very important. If you are unable to do so, you may have to pay a penalty. Moreover, if there are repeated defaults on EMI payments, the lender can even seize control of your property, since it serves as collateral. However, your home loan EMI can take away a major chunk of your income. Thus the question remains, how to reduce home loan EMI? Well, it’s quite simple really -- just opt for a long tenure loan. You can repay the loan in tenures lasting up to 25 years or more. This way you can reduce your monthly EMI considerably. That said, long tenures mean the overall cost of your loan will increase because you will be making more interest payments.
3. Choose the EMI date tactically
   Lenders allow you to choose your EMI date when you take on a home loan. Choosing the right date is very important if you don’t want to default on your loan and also helps reduce home loan burden. Opt for an EMI payment date that is closer to the day you get your salary. So, if you receive your salary on the first day of every month, choose the fifth day of the month as your EMI date. Essentially, you should choose a day closer to your salary day so that you have enough funds to pay the EMI and you don’t have to worry about additional charges related to non-payment of EMIs.
4. Pay a higher down payment and use variable pay to reduce the burden of the loan
   Another tactic for home loan reduction is to pay up a decent down payment when you first take on the loan. The higher the down payment you make, the lower will be the interest rate quoted on the loan, which in turn reduces the overall burden of the loan from the very beginning. Moreover, the processing fees also go down if the loaned amount is smaller. Additionally, you can use your variable pay – income earned from annual bonuses on salary, incentives and so on to pay extra EMIs, over and above the 12 annual instalments. This amount can be parked in your home loan account and used whenever cash emergencies prevent you from paying your monthly EMIs.
5. Refinance the loan if necessary
   If, mid-way through your loan, you realise that the interest rate you are paying is higher and if you find yourself wondering how to reduce home loan interest rate, you can simply opt to refinance the loan. Negotiate the terms of the loan with your existing lender and seek a lower interest rate. You also have the option of changing lenders by transferring your loan to another offering a lower interest rate. You should especially keep a close eye on the home loan interest rates and use this strategy to your advantage whenever the RBI announces a reduction in interest rates.
   Final word: As is evident, it is easy to reduce home loan costs if you create a good strategy from the very beginning. Whether it is researching the various lenders or paying a healthy down payment, negotiating the terms of the loan with your lender, or opting for higher tenures -- all these strategies are simple, straightforward and practical. Employing these strategies can truly lead to a lot of savings in the long term.

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• Reduce Your Interest Rate with These 3 Simple Steps
• Ways to Repay Your Home Loan Faster
• Offloading Your Home Loan Liability Sooner

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