The majority of individuals dream of owning a home, and applying for a home loan is the biggest financial decision they will ever make. Your monthly expenses may be burdened if you have to pay large monthly installments (EMIs).
If you have the correct balance of the principal amount, interest rate, and loan term, which all depend on one another, you can lessen the burden of your home loan to some extent.
Here are a few considerations you should make if you plan to apply for a home loan:
Do thorough research before shortlisting the lender
It is crucial to do your research on lenders, compare their offers, and then shortlist the best one because there are so many lenders today offering home loans at low interest rates. You can also compare the interest rates offered by several loan providers before making an informed choice. In addition, it’s a good idea to consider the lender’s reputation in the industry, processing costs, and other aspects before shortlisting the lender.
Opt for a shorter loan tenure
You will ultimately pay more interest with a longer loan term for a home. The monthly EMI amount may increase if you choose a short term loan, but the amount of interest paid will be significantly reduced. Determine your monthly expenses, the loan term, and the EMIs before applying for a home loan.
Prepay your home loan
Try to prepay your home loan if the interest rate is floating whenever you have additional money in your account. For the first few years of your home loan term, the majority of your loan EMI goes towards interest payments, with the remaining portion going towards principal. Prepayments made frequently will greatly reduce both the principal amount and the total interest payable.
Make a higher down payment
The interest rate and monthly installment will be lower if you make a larger lump-sum payment or down payment. A large down payment will give the lender the idea that you are a risk-free borrower who will make all of your EMI payments on time.
Transfer your loan to a different lender
You can transfer your home loan to another lender with a reduced interest rate if you’ve been making on-time payments and have a strong repayment history. This is often referred to as a balance transfer on a home loan. Calculate the associated transfer costs, such as foreclosure and processing fees, before moving the home loan, though.
Negotiate with the lender
You can always bargain with the lender and request a lower interest rate if you have a strong credit score, an exceptional repayment history, and a stable income. When it comes to fostering a positive relationship with the bank, having a salary account or a long-standing account will be a distinct advantage.
Search for better deals
Borrowers with a strong credit history are preferred by lenders. Banks are more likely to offer you a lower interest rate if your credit score is 800 or higher. Additionally, you may be eligible for a better offer and a cheaper interest rate on your home loan if you have a strong repo with the bank. The best time to apply for a houme loan or request a better offer from the bank is around the holiday season, when banks frequently lower their interest rates.
