Who has already taken the home loan, EMIs are probably one of the biggest outflows from our monthly income. As it consumes 30 to 40% of your income and is the biggest expense in the monthly budget. Hence, it is always a good idea to decrease the EMI towards your Home Loan in any possible way. However, when you take a home loan, your EMI is dependent on a few things which are the interest rate payable on it and the tenure period of the loan.
Let us now discuss the ways how a new or an existing home loan borrower can reduce their Home loan EMI burden-
Try to Avail your Home Loan at the Lowest Possible Interest Rates
Interest rate is the biggest factor on which your home loan EMI depends. If the interest rate is low, you need to pay less interest on the borrowed amount which makes your EMI low. So, if you are planning to avail of a home loan, your first criteria to select your lender should be to check for the interest rate at which they are offering the loan. Compare with all the options available in the market and then select the one who is offering you the loan at the lowest rates.
For example- PNB is offering home loans at 8.5 % while SBI is providing home loans at 8.35%. Here the difference might seem like a hairline difference to you. But when you will do the calculation for your complete tenure, the difference will be huge.
Higher Down Payment
You might not be aware of it, but making a higher down payment while taking a home loan can reduce your EMI burden. Paying a higher amount for a down payment will reduce the principal amount for your loan. This can be better understood in this way- Suppose the house you want to purchase is of ₹70 lakhs and, if you pay to say 8 lakhs as the down payment amount, then you have to pay EMI only for the remaining 72 lakhs plus interest.
Doing Prepayment & Part-payment
There are many times when we get incentives, bonuses in your working career. There are times as well when our extra activities or investments add a good amount of money to our bank account. When we get such money, many of us spend it on our comfort as in purchasing gadgets, travel and so on. But one in spite of these things, one should give priority to their home loan. One should think of making part payment of prepayment. This is because your home loan consumes a major part of your monthly income and doing this can reduce your EMI to a great extent.
One of the ways to reduce the EMI towards your home loan is transferring it to another lender who is offering you the same loan at a low-interest rate. If not switching the lenders, switching the plan with the same lender can also help you. But that requires your lender to have such a plan. Changing your lender is a good idea as doing this can save a lot of money which you would have paid on interest. However, before you do this, it is important to calculate the total cost involved in for-closing your loan with the existing lender. Then it is also important to calculate the cost involved in borrowing with a new lender. If the sum of these two is less than what you are going to save, then only you should go with this option.
Opt for a Longer Repayment Tenure
The tenure and EMI are inversely proportional to each other. The longer is the tenure, the lower will be your payable EMI and vice versa. However, opting for a longer tenure can cost you more as you end up paying more on the interest. So, if you don’t bother about the interest and want to keep your EMIs low, then you can opt for a long repayment tenure. But opt for this option only if you think you cannot afford to pay higher EMIs.
I think the article will help you to understand the home loan EMI concept including the factors affecting it. However, you can go with any of the above-mentioned points to reduce the EMI for your home loan.