Select a short tenure
The loan tenure plays an essential factor in deciding the interest rate. Longer tenure, like 30 years, will take away a load of monthly payments, but you will have to pay thousands of dollars for the interest. However, in short tenure, your interest rate will be significantly less.
Though you still have to pay a hefty amount every month, it’s still better than spending money on interest. So, while selecting the loan, be very careful about picking the tenure.
Use SIP to save money
SIP is a great tool to save money for your future. The full form of SIP is a Systematic Investment Plan. In this plan, your money gets invested in equity and provides you with a good return in 2-3 years. You can use this money to close the home loan.
If you save 20% of your EMI in a SIP throughout the loan period, you can get a lump sum amount before the loan ends. Then, use it to pay off a large portion of your loan.
Plus, this savings will act as an important tool to negotiate the interest level on your home loan.
Do not miss the prepayments
The EMI you pay at the beginning of the loan tenure is used to pay off the interest. So, if you clear your prepayments in the initial years of the home loan, you can cut down your interest rate.
Save all the bonus or part-time job salary to fulfill the prepayment. This is one of the best tricks on the list.
Keep your down payment high
Saving and investing money is a good habit. It can help you survive tough situations. Also, this practice can reduce your home loan interest rate.
Considering your dream of buying a dream home, you probably saved a lump sum. If you deposit this money for the down payment, you can enjoy the benefit of less loan amount with a low-interest level.
The financial institutions provide 70% to 90% of the property value depending upon the borrower’s financial condition and down payment. But the best way to save money is to borrow less and pay even less.
If you don’t want to be involved in so much technicality, contact Real Simple Home Loans for quick home loans.
Research the interest rate
Trust me; you will thank me for this. Before taking a loan, it is extremely crucial to perform proper research on available loans and compare the interest rate of different financial institutions.
Many websites and YouTube channels provide detailed information on the charges and rates. This will allow you to make an informed decision.
Transfer the remaining home loan balance to a new lender
Suppose your current lender is determined on their terms and not ready to negotiate the interest rate. In that case, you can always transfer the remaining home loan balance to a new lender offering lower interest and other benefits.
Some lenders also come with customized home loan balance transfer solutions to reduce your loan liability.
Revise your installments
Some financial institutions allow you to revise your installments annually. As a result, you can always switch to a higher EMI to decrease the tenure. With this, the interest level will also go down significantly.
Improve your credit score
Your credit score is a great indicator of how you deal with borrowed money. For example, a popular finance platform suggested that a credit score over 750 is good. With this score, the lender considers you a responsible borrower and will offer you a good interest deal on your loan.
In the opposite scenario, you might have to pay huge interest. Try to maintain a great credit score by keeping track of your payment history and owed money and complying with all the deadlines.
Over to you…
Now that you know all the tricks, it’s time to apply them to reduce interest on your home loan. Remember that you can always shift to a floating rate rather than a fixed one for more flexibility and less interest.