Owning a home is a part of everyone’s wish list. But, ever-increasing prices of home and high-interest rates of home loan force us to keep this wish aside for some other time. Home loans are a big sum of money that can range between lakhs and crores. And being able to save even a small per cent somewhere can mean big savings in the long run. Here are few ways you can choose to save on home loan.
- Check your CIBIL score and leverage on it – It is wise and practical to check your CIBIL score before approaching a bank for a home loan because CIBIL score is one of the important considerations by the bank to assess your home loan eligibility. CIBIL score ranges between 300 and 900. It is seen that 79% of the loans approved are for individuals with a score greater than 750. Banks also give loans at lower interest rates to those with higher CIBIL score.
- Home loan comparison – Give yourself enough time to compare and analyse the home loans and loan interest offered by different banks because a home loan is a long-term affair. It is always better to wait and sign up the deal than rueing over missed opportunity to deal with a more reliable and affordable loan agreement.
- Down payment – Banks may ask you to make a 15% to 20% down payment, and the balance will be calculated as EMI. But, this doesn’t mean you are not allowed to pay a higher down payment. Shelling out lesser down payment may sound good but remember that higher down payment substantially reduces your burden of EMI burden. It also saves you a lot of money as interest. So, it is advisable that you make the highest possible down payment within your limit.
- Loan tenure: Like it or not, if you choose longer tenure to repay the loan it will attract more interest, compared to if you choose shorter tenure. However, shorter tenure means higher EMI pay out. Hence, opt for increasing EMI amount annually so that it remains in line with your annual raises at work.
- Prepayment: Unlike earlier times, prepayment of home loan hardly attracts any penalty; rather it is almost nil these days. Being aware of this aspect and making use of it to pay off the loan is a huge advantage because if you manage to get some extra income you can use it to prepay the loan. This will reduce EMIs and also save from the interest rates, thereby reducing the burden of the loan to a great extent.
- Interest type: Fixed rate and floating rate are two types of home loan As the term implies, fixed rate interest remains same for the entire tenure of loan repayment or for a period of 5-10 years, whereas floating rate interest fluctuates depending on market conditions including RBI norms and government policies. Some banks may offer an option to switch between fixed and floating rates of interest, hence, it is advised that you get a thorough understanding of the procedure from the bank itself, so that you can wisely choose the interest type and save considerably on it.
- Negotiate – This is rather an underrated aspect of how can you save on home loans. People often think that terms and conditions cannot be negotiated upon, but, the truth is all terms and conditions are negotiable, even the rate of interest depending upon your CIBIL score. So, if you have all documents in place and you also have a high CIBIL score, open up for a negotiation to get the best deal. After all, why shell out the money that can be actually saved!
- Loan transfer – This comes into picture when you already have a home loan In this case, other banks may offer you loan transfers at lower rates. So, keep an eye for such offers, as they may just turn out to be more cost-effective in the long run despite incurring processing and loan transfer charges.
You can easily calculate your home loan online and then apply home loan by considering the above-mentioned indicators to find out where you can make some savings!