In 2019, the housing sales saw a decent annual growth of 4-5% where more than 2.58 lakh houses were sold. It is quite apparent from these statistics that the demand for homes is increasing with time. However, the price of the houses is also escalating simultaneously.
In such a scenario, it is gradually becoming a mandate for common people to opt for a home loan to realise the dream of owning a house. Nonetheless, a sudden surge in home loan interest is restructuring the home loan EMI schedule to a great extent, leaving little room for people to fulfil other financial goals.
How home loan EMI is calculated?
Home loan EMI is one of the most vital components of the loan repayment process. While an individual avails a home loan, he/she needs to repay the loan principal and interest via Equated Monthly Instalments or EMIs. Several factors determine the EMIs of a home loan, but interest rates, loan principal and tenor are the most important determinants.
Taking the aid of online free tools like home loan EMI calculator, borrowers can get an overall idea of how much they need to pay as EMI. It helps in planning their financial liabilities beforehand.
Most reputed lending institutions let people use an online home loan instalment calculator free of charge. All they have to do is enter a few essential pieces of information about their loans like principal amount, tenor and interest rates, and within seconds, the instalment amount will appear on the screen.
Nonetheless, following a few smart tips, you can reduce the burden of home loan EMI to some extent.
What are the tips to reduce EMI for a home loan?
Since EMIs are monthly financial liabilities, you should first determine how much home loan EMI you can afford. It will help you to manage the monthly expenses and cash outflow efficiently. Depending on several aspects, the EMI amount is decided by the lender. It applies both for new and existing borrowers.
Moreover, if you are a new borrower, the following are some of the tips that you can consider while servicing a home loan.
For new borrowers
Look for lower interest rates
The home loan interest rates directly influence EMIs. Higher the interest rate, bigger the EMIs. Hence, an individual applying for a home loan should look for HFCs offering lower interest rates. However, the interest rates are determined after assessing the borrower’s credit score, income, age and other crucial parameters.
Go for substantial down payments
According to RBI guidelines; any financial institution will finance up to 90% of the property’s value as a home loan. The rest of the amount has to be paid by the borrower from his/her pocket. Rather than paying just 10% of the property’s cost, one should try to bear more. This reduces the home loan quantum, which, in turn, limits your EMIs.
Moreover, it also increases the loan eligibility of the borrowers and lowers the risk of lenders as well.
Opt for home loans with longer tenor
Choosing a longer tenor can effectively reduce home loan EMI. However, with longer tenor, the interest cost also increases. Hence, try to make prepayments whenever you have a surplus if you opt for a significant repayment tenor.
Several top financial institutions offer flexible tenor of up to 240 months in home loans so that you can choose as per your repayment capacity. They also extend pre-approved offers on different financial products, simplifying and accelerating the loan application procedure. These offers are available on home loans, loan against property, etc. You can check your pre-approved loan offer by mentioning your name and contact number.
For existing borrowers
Prepay whenever you can
If you are already servicing a home loan, you should look for the avenues to gather funds for prepayment. It ensures that either your home loan EMI reduces or the associated loan tenor. In either way, it facilitates easy repayment of this credit.
Opt for a home loan balance transfer
In case you are struggling to repay your existing home loan, you should look into how to reduce your EMIs with a home loan balance transfer. For that, you can look for the lenders that offer loan transfer facilities with lower interest rates. Accordingly, choose a lender and settle for better repayment terms.
Following these useful tips and tricks, you can reduce your home loan EMI burden significantly. However, try to repay the loan as early as possible to maintain a healthy credit score, leaving scope for achieving other financial milestones.