Different Ways to Reduce the Payment of Interest on Your Home Loan
A rising number of Indians have opted for home loans to finance their desired real estate property. By availing a home loan, customers can purchase a house as well as develop their savings corpus.
Financial institutions operate in a highly competitive housing credit market. They often offer exclusive benefits in terms of interests, tenors, and the principal amount of flexibility to attract new customers.
Individuals can also enjoy lower home loan interests by taking into account a few measures.
Primary factors affecting home loan interest
Lenders consider and analyse a customer’s home loan eligibility to determine the interest rates of the home loans. The customer’s profiles, as well as the property details, influence home loan interest rates charged by HFCs.
The primary factors that impact home loan interest rates are-
Credit rating-A customer’s credit rating influences the interest rates on debts. Individuals with high CIBIL scores over 750 can negotiate for more affordable rates of interest on home loans.
Lenders charge higher interest rates for customers with lower CIBIL scores.
Property value- A high-value residential property in an urban location, with ample amenities and connectivity accrues lower home loan interests.
The property can be auctioned off easily in case the customer defaults on repayment.
Properties with below-par facilities gather higher interests, as resale after defaulting can be difficult.
Down-payment- Higher down-payments on home loans increase an individual’s credit ratings as lenders have to extend lower funds against the same property mortgage. This reduces the risk weightage for the lender and ultimately brings down the rate of interest charged by lenders.
Ways to reduce home loan interest payment
Customers are open to several methods aimed at reducing the home loan interest during a tenor. The ways are-
Compare interest rates
Individuals benefit from lenders offering lower home loan interest rates in the housing credit market. As different lenders extend home loans in India under various interest rate conditions, a comparative study of interest rate offers by various lenders helps an individual select a suitable HFC.
Customers can also choose between lenders which offer fixed rate interests and adjustable-rate interests on home loans. Looking for lower interest rates prevailing in the market will reduce an individual’s interest payment on the home loan.
Part prepayments
Part prepayment refers to a considerable sum paid towards a loan over and above the repayment schedule aimed to reduce the total interest payable. A part prepayment directly reduces the outstanding principal and revises the repayment schedule. Depending on the proportion of the prepayment and the loan, the borrower can benefit from either lower EMIs or a shorter tenor or even both.
Avail tax exemptions
Customers can claim home loan interest tax benefits up to Rs.2,00,000 under Section 24(b) of the Income Tax Act, 1961. Exemptions of Rs.2 lakh on interest payment ensure that customers can develop their savings corpus. As per Section 80C of the same act, individuals can also claim exemptions on the principal amount up to Rs.1.5 lakh per annum.
High EMIs
Home loan repayment through high EMIs helps you trim your home loan tenor, and ultimately reduces the rate of interest. High EMIs help individuals retain a substantial amount in the future by means of lower interest payment.
Customers can use an online housing EMI calculator to plan their repayment amount and schedule effectively.
Potential-home owners can pay reduced home loan interest by considering a few wise options and availing the appropriate tax benefits on the interest and principal amounts. Refer to a leading lender with an above-par CIBIL score and a co-applicant to avail a home loan at the most beneficial terms today.