We all dream of owning our dream home, but fulfilling this dream requires proper financial planning. After finalizing a residential apartment or even a commercial space for investment, most people start exploring suitable home loan options. Choosing the right home loan is not as simple as it seems, as interest rates play a crucial role in the overall cost. Therefore, doing some primary research before applying for a home loan is essential. Below are a few effective ways to reduce the interest burden on your home loan.
Shorten Home Loan Duration
A longer loan tenure results in paying higher interest over time. It is always advisable to choose your home loan tenure carefully while purchasing a residential apartment or planning an investment. You can use an EMI calculator to estimate your monthly installments and opt for a tenure where the EMI is manageable. Shorter tenure helps in reducing the total interest paid to the bank.
Revise Your EMI
Many banks offer the flexibility to revise your EMI during the loan tenure. If you receive a salary increment or experience growth in business income, increasing your EMI by even a small percentage can significantly reduce the loan burden. This strategy works well for both homebuyers and investors purchasing residential or commercial space, helping them close loans faster with reduced interest payouts.
Refinance Your Home Loan
Interest rates in the market keep changing, and staying updated can work in your favor. You may switch your home loan to another bank offering a lower interest rate. However, before refinancing, ensure you review all associated terms, conditions, and charges. Refinancing is a smart option for reducing interest, especially for long-term property investments.
Pre-Closure of Loan
If you have a steady cash flow and surplus funds, pre-closing your loan can save a substantial amount of interest. By paying off the outstanding loan amount early, the interest component is waived off. Only a pre-closure fee may apply, depending on the lender’s policy, making this an effective option for financially stable borrowers.
