5 smart ways to handle home loan interest rates.

Author: Anurag Mishra

Home loan interest rates are often looked upon as an expense to be wary of. Some potential borrowers keep postponing the idea of a home loan or drop it altogether due to this expense. However, there have been significant changes in today’s home loan scenario that should lighten the burden of this expense.

First off, the interest rates on home loans today is the lowest they have ever been in the history of housing loans. You can get a home loan with interest rates as low as 8.35% depending on the loan amount you plan on borrowing. Moreover, there are significant government subsidy schemes that offer to save against interest rates to medium income groups. Some of these schemes offer savings to the tune of up to 2.67 lakh as interest subsidies.

But if even after reading the above, you are still reluctant on the idea of a home loan due to the interest rates associated with them, then this article will highlight 5 ways you can smartly tackle this cost and gain significant savings from the same.

1. Save for a larger down payment.

Home loan interest rates are calculated on the principal amount. If you save a higher down payment, you borrow less and so the interest is calculated on a smaller amount. This will provide you with smaller interest amount in your EMI. Also, the smaller the loan amount, the lower the interest rate applicable.

2. Work on your credit score.

Whilst saving for a better down payment, you should work on your credit score. Pay your credit card bills on time and ensure any other loan repayments are paid on time. Try using your oldest credit card more, stay within your credit limit and always make payment before the due date. A better credit rating will help you negotiate a slightly lower interest rate that should help you sizeable savings over the tenure of the loan.

3. Plan prepayments.

Appraisals, bonuses and any other windfall gains should be used to repay your loan. As mentioned earlier, home loan interest rates are calculated on the principal amount that has to be repaid, making prepayments reduced this amount thereby reducing the interest amount whilst also getting you out of debt much faster.

4. Refinance for lowered home loan interest rates.

If you find the interest rates too much to handle, you can always refinance your home loan with another lender that offers lowered interest rate. This will allow you significant savings and you can also ask for extended tenures to reduce your EMI amount.

5. Use home loan interest rates in your favor.

The interest you pay on a home loan helps you save taxes. You can use the annual interest amount paid to avail deductions up to Rs. 2, 00,000 annually under section 24 of the Indian Income Tax Act. If you apply jointly, both applicants can save this amount individually.

We hope after reading this article, you’ll look at home loan interest rates in a new light and go ahead with the idea of a home loan if you’ve been putting it off due to this cost. Remember to consult a financial expert of talk to a lender for further clarity.

Good luck and all the best!