Being an owner of a house is definitely something to be very proud of. However, it is common knowledge that real estate prices are quite expensive and affording a good place is not an easy feat. This is why many people start off by taking a place on rent for a couple of years, save up for the down payment of a house, apply for home loan, and finally get their dream house.
Now, applying for a home loan requires a lot of planning. You need to calculate the monthly instalments that can comfortably be paid off, find a good lender, and do research on various loan plans. One important aspect that needs to be focused on is the interest rate of the home loan. Many borrowers have faced issues with repaying their loans because of high interest rates. This has ultimately led to their credit scores getting affected. However, it is not at all necessary for you to face the same problem. The good thing is that there are effective ways to avoid getting stuck with a high housing loan interest rate.
Here are 3 easy tricks that will help in getting a low interest rate for a home loan:
- Prepay the home loan
One of the most effective ways of lowering the interest amount and saving money is to start making prepayments of the home loan. This of course would require strict financial discipline to ensure the availability of additional funds. By choosing to prepay the loan, you can avoid paying pre-closure charges if the interest rate of the loan is floating. It is possible to prepay a fixed amount at regular intervals. This will be effective in bringing down the outstanding amount, ultimately reducing the interest cost too. It is advisable to prepay the loan during the initial years, as this will help in saving more interest.
- Switch from floating to fixed interest rate
If you are worried about the interest rates going higher in the future, there is always an option of switching from a floating interest rate to a fixed interest rate. This way the home loan interest rate will remain constant even when there is a slight increase in the market rates. Also, do note that switching from a floating interest rate to a fixed one might not incur a penalty. However, the lender might charge a penalty if you are switching from a fixed interest rate to a floating one.
- Go for a home loan balance transfer
If you already have an existing home loan but find a different lender offering a better interest rate, it is advisable to opt for a home loan balance transfer. Even a slight difference in the interest can result in a significant difference to the total cost of the loan. However, before going for this transfer, make sure to check about its processing fees.
These 3 tips are very effective in reducing the home loan interest rate. Also, make sure to use a home loan EMI calculator to know about the loan’s monthly instalments. This will help in understanding whether the interest rate is affordable or not.