Buying a home is a lifelong decision. It involves and reflects your years of money, your hard work, and your future-settling dreams. Fulfilling this dream sometimes requires home loans. In India, there are several ways by which you can get a home loan depending on your financial requirements. This blog will help you understand the various aspects of fixed-rate home loans and variable-rate home loans. Comparing them will help you find better home loan options.
It also provides clues on cheap home loans, how to save money with home loans, and smart home finance strategies. We will also look at how to get a home loan with little interest, the advantages of a balance transfer home loan, and how to find low-interest mortgage loans.
To make things clearer, we will be explaining Tips to Cut Home Loan Interest Rate, How to Save with Home Loans, and the Advantages of Home Loan Refinancing. At last, we will be noting the Best Lenders for Low Interest Home Loans.
Let’s understand Fixed-rate Home Loans
A home loan is a process in which a lender borrows funds to acquire or build a residential property. Later, the borrower returns the money with a fixed-rate home loan in EMIs (equated monthly installments) over a certain fixed period.
Fixed Rate Home Loans
In fixed-rate home loans, the interest rate is fixed for the entire loan period. This makes EMIs predictable, helping in accurate financial planning. Fixed rates may be marginally higher than variable rates, and the borrower will not enjoy the benefits of possible market rate decreases.
Variable Rate Home Loans
Variable Rate Home loans, or floating-rate loans, are those whose interest rates change with market conditions. While this makes EMIs volatile, borrowers may get the benefit of lower rates during good times in the economy. However, there is always a chance of higher EMIs if market rates increase.
How can one get a desired home loan?
To get a good home loan, you need to follow a few steps. These steps are:
Assessing Your Financial Health: Review your income, spending, outstanding debts, and credit score. A good credit score improves loan prospects and can obtain lower interest rates.
Research lenders: Shop around for deals from different banks and financial institutions. Check for reasonable interest rates, good terms, and quality of customer service.
Understand Loan Terms: Read the loan document carefully for information on interest rates, terms, processing charges, prepayment penalties, and other conditions.
Negotiate Terms: Negotiate interest rates and fees from lenders without any hesitation, particularly if you have a good financial record.
Affordable Home Loans: Obtaining an affordable home loan requires you to discover a loan that has good terms suitable for your financial status. The following are tips to make this happen:
Choose Longer Tenure: This will surely hike the total amount of interest to be paid but lessen the EMI burden, allowing easy monthly payments.
Make a Greater Down Payment: A greater down payment decreases the loan size, resulting in reduced EMIs and interest payments.
Check government schemes: schemes such as the Pradhan Mantri Awas Yojana (PMAY) provide subsidies for qualified borrowers, reducing the cost of home loans.
Home Loans to Save Money: To save money using home loans, try the following:
Prepayment and Part Payment: Utilize surplus funds to make prepayments, reducing the principal amount and, consequently, the interest burden.
Balance Transfer Home Loan: If another lender offers a lower interest rate, transferring your existing loan can lead to significant savings. However, assess the associated costs to ensure overall benefit.
Regularly Review Interest Rates: Stay informed about market trends. If interest rates decline, consider refinancing or negotiating with your lender for better terms.
Home Loan Options
Home financing goes beyond the conventional home loan. Other options are:
Loan Against Property (LAP): Using existing property to raise funds, which is at relatively lower interest rates than unsecured loans.
Top-Up Loans: Add-on loan amount above your current home loan, handy for renovations or any other financial exigencies.
Home construction loans: designed for those building a new home, with disbursements synchronized with construction phases.
How To Get a Home Loan With Low Interest
To obtain a home loan with low interest, consider these strategies:
Maintain a High Credit Score: A score above 750 often qualifies borrowers for preferential rates.
Stable Income and Employment: Demonstrating consistent income and employment history assures lenders of your repayment capacity.
Choose the Right Lender: Different lenders offer varying rates. Research and compare to find the most competitive options.
Balance Transfer Home Loan: A balance transfer home loan involves transferring your existing home loan to another lender offering a lower interest rate. Benefits include reduced EMIs and overall interest savings. However, consider processing fees and other charges to ensure the transfer is cost-effective.
Low Interest Mortgage Loans: Low-interest mortgage loans are loans secured against property, often featuring lower interest rates due to the reduced risk for lenders. To secure such loans:
Maintain a Healthy Financial Profile: A good credit history and stable income improve eligibility for lower rates.
Compare Lenders: Varying institutions provide different rates; proper comparison can help identify the best offer.
Tips To Lower Home Loan Interest Rate
Lowering your home loan interest rate can make a big difference. Here are useful tips:
Improve Your Credit Score: Monitor and maintain your credit score by paying your dues on time and lowering outstanding amounts.
Choose a Shorter Tenor: Although EMIs are more, shorter tenors tend to have lower rates of interest and a lesser total interest outgo.
Make payments regularly: Direct any surplus income towards loan prepayment, which directly decreases the principal value and the amount of interest due.
Negotiate with Your Lender: Use a healthy repayment track to negotiate improved terms or opt to change to a lender with improved terms.
Switch to a Floating Rate: If you expect interest rates to fall, a change from a fixed to a floating rate will be advantageous.
How to Save Money with Home Loans
In addition to availing low interest rates, look at the following options to save money on home loans:
Avoid Unnecessary Add-Ons: Insurance or other products may be offered by lenders with the loan. Evaluate their requirement to prevent unnecessary expenses.
Automate Payments: Scheduling automatic EMI payments avoids late charges and interest rate increases due to missed payments.
Make the Most of Tax Benefits: Take deductions under sections 80C and 24(b) of the Income Tax Act for principal and interest repayment, respectively.
Learning About Home Loan Refinancing Benefits
Home Loan Refinancing means switching your current loan with a new one, usually to take advantage of reduced interest rates or improved terms. Benefits are:
Lower EMIs: Lower interest rates lower monthly repayment burdens.
Lower Tenure: Refinancing can enable you to shorten the loan tenure, resulting in saving on interest.
Access to Additional Funds: Top-up loans are available in certain.
