Even though housing loans are affordable funding sources for the purchase or renovation of residential properties, the prolonged tenor of EMI payments may take a toll of the borrowers. Tools like home loan EMI calculator, however, allow one to gauge their affordability initially and apply for a loan accordingly.
One can also go through the following tips to know how to reduce their EMIs on a home loan.
- Increase your loan tenor – One can opt for an extended loan repayment period which will divide the total loan liability into more number of months and result in reduced monthly instalments. However, borrowers should keep in mind that extending loan tenor will lead to increased overall interest payment. One can use a home loan calculator to compute the most affordable EMI and a suitable tenor accordingly.
- Make a higher down payment – According to RBI guidelines, lending institutions can finance up to 90% of the total value of the property, and borrowers must meet the remaining amount as a down payment. Therefore, one can pay a higher amount as down payment which will result in a reduced loan amount and subsequently lower housing loan EMI.
Making a high down payment also improves an applicant’s eligibility as it reduces the lender’s risk through reduced funding.
- Prepay your home loan – Borrowers can also prepay their home loan in part whenever possible to reduce the total outstanding loan amount. Consequently, their home loan EMI will go down too. Furthermore, it lowers the interest component as well.
Additional Read: Calculating Home Loan EMI: Step by Step Guide
Additionally, you can also opt for a balance transfer facility for attractive interest rates with another lender. Nevertheless, you should compare interest rates and associated fees offered by various lending institutions before availing a home loan to check EMI affordability.
