Repaying a home loan through EMIs or Equated Monthly Instalments is the fundamental repayment schedule a borrower has to follow. He/she pays a predetermined amount each month which will repay the principal availed and the interest payable as per the principal according to the tenor.
The EMIs or installment amount of a housing loan is usually affected by two factors, which are –
- The interest rate at which the lender extends the loan.
- The tenor or time span provided to repay the loan completely.
By specifying these two determinants on the EMI calculator for a house loan, loan-seekers can check the monthly installments he/she will be required to pay after borrowing the funds. Mortgage loans such as home loans are a secured form of credit.
A home loan is a long-term financial commitment. This is why there are certain essential things one must know before availing a home loan. Among several other points included in it, the most crucial thing which borrowers must concentrate on is to find ways to reduce housing loan EMIs. Lower installment liabilities help to minimize the financial burden considerably.
How can you bring down your home loan EMI amount?
Individuals looking to avail a home loan, as well as existing borrowers can seek ways to reduce their installment amounts. Individuals who are yet to avail the funds can follow the below steps to pay lesser EMIs –
- Compare home loan interest rates and benefits
The primary step to reduce the EMI amount is to select a lender who provides housing loans at more affordable interest rates. There are numerous lenders in the debt market who are offering affordable home loans. Other than the interest rates, you should also consider various other related terms of such options to extend tenor, charges associated with part prepayment or foreclosure, balance transfer charges, etc.
- Opt for a long repayment tenor
Longer the repayment tenor, lower will be the payable EMIs. Prospective borrowers can easily use the home loan EMI calculator to estimate the payable EMIs as per their budget.
- Arranging a bigger down payment
RBI rules mandate that a home loan can cover up to 90% of the property’s value but only if the lender is willing to consider the attached risk weight of 35%. Note that this LTV limit is for loan amounts between Rs.30 lakh and Rs.75 lakh. However, if you wish to pay lower EMIs, you can choose to contribute a larger sum as a down payment. Doing so will reduce the total loan availed and compel the lender to offer more affordable interest rates considering the lower LTV and risk weight.
Existing borrowers who are finding it difficult to cope up with the installment liabilities can consider the following options to lower down their installment amount –
- Refinancing the loan by switching lenders
Reducing EMIs through home loan balance transfer is an ideal way to lessen the existing debt burden. You can shift your home loan to a different lender who is offering loans at a more competitive interest rate.
- Negotiating with the existing lender to relax the service terms
You can try convincing your existing lender to reduce the interest rates being charged on the home loan. Considering you are on fixed rates and that you have completed a certain portion of your repayment tenor, you can ask the lender to reduce the interest rates or offer an interest waiver.
- Prepayment of the home loan
The pre-payment of a loan means paying off a portion of the principal sum when a borrower has surplus funds available. When an individual prepays a loan before the end of its tenor, it also reduces the overall interest outgo. On making prepayments, the total outstanding balance of the loan comes down, thereby reducing the upcoming EMIs.
A well-planned approach towards loan repayment ensures paying off debts responsibly, without resulting in defaults.
A home loan EMI calculator can be considered as a crucial tool that helps in determining the affordability of a housing loan. By altering the inputs, borrowers can compare the EMIs before deciding the appropriate amount he wants to avail. Know how to get better interest rates on your home loan and refer to leading lenders to easily do so.