- Date : 30/05/2023
- Read: 4 mins
Own your dream home without the stress of EMI payments. Reduce your EMI with prepayment, a higher down payment, floating rates, changing lenders, or co-borrowers.
- Millions of borrowers are facing higher costs due to rising interest rates on home loans.
- To reduce monthly EMI payments, consider prepaying the loan, increasing the down payment, or choosing a floating interest rate.
- Switching lenders or adding a co-borrower to share the EMI burden can also provide financial benefits.
Are you struggling with your home loan EMI payments and want to achieve financial freedom? In India, the middle class heavily relies on home loans to own a house, and with the rise in interest rates, borrowers may face higher EMI burdens. But fear not, as this 5-step guide to home loan management can help you effectively manage your home loan and save money in the long run.
Here are five strategies that can reduce your home loan burden. The suitability of each option depends on your situation. Choose the one that fits you the best.
1. Prepay the loan
Prepayment of home loans can help reduce the EMI burden by reducing the principal loan amount and, therefore, the interest payable. Borrowers can opt for prepayment by using bonuses received in the office, gains from the stock market, inheritance, and more to prepay (in full or partial) the home loan. It can help borrowers save money in the long run.
Also Read: How will the repo-rate hike affect your home loans?
2. Increase the down payment
Increasing your down payment when buying a house can help lower your EMI burden. By reducing the amount you borrow from the bank or financial institution, you can lower the principal amount and subsequently, the EMI. This can lead to significant savings in the long run as you will pay less interest over the loan tenure. Additionally, a higher down payment demonstrates your commitment to repay the loan, reducing the risk of default and resulting in a lower interest rate, further reducing the EMI.
3. Opt for a floating interest rate
If you're planning to take out a home loan, it may be worth considering a floating rate option, especially during periods of declining interest rates. Although floating rates are subject to fluctuation, they are tied to market indices, which means that if rates decrease, borrowers can benefit from lower EMIs and lower financial pressure. While fixed interest rates provide certainty and consistency, floating rates may offer long-term savings.
4. Change your lender
Consider switching lenders to reduce your EMI burden. Look for a lender with lower interest rates and flexible repayment options. By finding a better deal, you can save money over the loan's tenure. Keep in mind the upfront costs, such as processing fees, and choose a lender who can waive them. Exploring options from multiple lenders can also help you negotiate better terms with your current lender, further reducing your EMI.
5. Find co-borrowers to share the EMI burden
To reduce your monthly home loan instalments, consider a joint home loan where co-borrowers (co-owners of the property) can combine their income to increase eligibility. Female co-borrowers can also benefit from stamp duty concessions and tax deductions under the IT Act in some states. Several lenders offer discounted interest rates if the co-owner is female.
Also Read: Home loan rates hiked: Is prepaying your home loan a good idea?
Parting thoughts
Managing a home loan can be challenging, but implementing the right strategies can help reduce the EMI burden and save money in the long run. By considering options like prepayment, increasing the down payment, opting for a floating interest rate, changing lenders, and finding co-borrowers, borrowers can effectively manage their home loans and achieve financial freedom. With proper planning and execution, homeowners can successfully manage their home loans and enjoy the benefits of homeownership without the financial burden.
