Home Loan is a good option for all those who can’t pay the property amount at a time. The rising property rates have brought the option of home loan to many home dreamers.
Once you have finalized the property the next question comes in mind of the home loan and the finance companies in the market. There is a tuff competition between the financial companies for offering the best interest rates and the other facilities also.
Here are some tips on Home Loan to save money.
Try to Make Prepayment of the Loan
Every year try to keep aside some money for the prepayment of the loan. This way you will save the interest and the duration of the home loan.
In the beginning stage of home loan the interest rate is higher so try to make prepayment in early years of the home loan.
If you are getting yearly increment try to set the increased percentage of the salary towards the prepayment of the loan. Even the yearly bonus you can shift towards the prepayment of the loan.
Most of the finance companies have removed the prepayment penalty so make the prepayment as much as possible. By prepayment of the loan you will become owner of the property within lesser time.
Try to pay more down payments and take lesser loan
While taking bank loan most of the finance companies have the condition of paying 20% of the property amount as the down payment.
If you pay more down payments the loan amount will be less and you will be paying lesser home loan interest rates and there will be less tenure of loan.
Also if you are taking a big loan for your 2BHK or 3BHK flat with luxurious amenities like Sauna, Sports zone, swimming pool etc. this will increase your loan amount, interest rates, loan tenure and the maintenance also.
So you can cut down for the one bedroom or drop out the property with luxurious amenities and can save money on the higher interest rates.
Before taking a home loan do a proper research.
- Find out what is the current interest rate.
- Which finance companies are offering lower home loan interest rate?
- Who are offering the extra benefits?
- Who are not charging for the prepayment of the loan?
- Is there any penalty or any charges for switching the loan to another financial company?
- What is the floating rate and the fixed rate?
- Find out the processing fees of the financial companies.
A proper research before finalizing the home loan will save your lot of money.
Negotiate for the interest rates
Yes, many don’t know but you can negotiate for the interest rates. The financial company’s sales person or executive might lessen the interest rate as they also have a monthly target and they don’t want to lose the customer.
Negotiating interest rate will save your lot of money on the interest rate.
If the banks have increased the interest rate you can increase the EMI amount instead of increasing the tenure of loan.
By extending the tenure of loan you will be almighty paying more interest and more money. So better stay on increased EMI amount.
Bank may lower your interest rate when the home loan interest rate is decreased in market this will lower your EMI and increase your loan tenure. So request bank to keep the same interests rate even if the market interest rate is lower.
You can negotiate with the property owner for the property rate and real estate agent for brokerage charges by this also you can save some money.
Before lending you the loan the financial companies check the credit rating of the borrower. If your credit rating is less than 750 then the financial companies don’t approve the loan application.
A better credit rating will approve your home loan with lower interest rate. So before applying for a Home Loan approve your credit score. Credit score can be improved by paying off the old dues, clearing the credit history etc.
Now a days it is easier to switch from one financial company to another financial company for the lower interest rate. But before that do a proper research they might have some extra charges.
You can also increase your loan eligibility by taking a joint loan in name of your spouse if spouse is also working or earning money. Read the loan agreement carefully otherwise you might land up in problem in future.
Closing a home loan earlier not only makes you the owner of the property but also saves your money and you can lead towards a tension free life.