Owning a house is an accomplishment to be proud of. However, it is not an easy feat to achieve, as buying a house requires a lot of financial strength. What most homebuyers do is apply for home loan plans to arrange for the finances that they need. Now, while home loans can be a great way of putting funds, some people have reservations about applying for one. The leading cause of this is often the housing loan interest rate. While it is true that there have been borrowers who have struggled to clear their home loans because of high interest rates, this does not have to be the case for everyone!
For those who are worried about being stuck with a high interest rate on their home loans, keep in mind that there are several ways in which a borrower can bring down the home loan rate.
Here are 4 effective ways in which a home loan interest rate can be brought down:
1. A higher down payment can bring down the interest rate
A home loan does not cover the entire cost of a property. Depending on the loan amount, the loan can cover up to 75-90% of a property’s worth. The remaining amount will have to be covered by the borrower, which is called the down payment. Now, when the down payment is higher, it reduces the lender’s risk since the loan amount comes down. This is when lenders can offer a lower home loan interest rate.
2. Keep a good CIBIL score before applying for the loan
No matter what type of loan borrowers apply for, financial institutions will always check their credit scores. This is why it is essential to maintain a good CIBIL record before applying for a home loan. Since lenders prefer borrowers with good credit scores (750 or more), better benefits are offered to them, such as a higher loan amount at a lower interest rate.
3. Go for a short repayment tenure
Most borrowers prefer to opt for a long repayment tenure as this means that their monthly installments would be easier to pay off. However, what they do not realize is that the loan’s interest gets accumulated with each passing EMI payment. Therefore, opting for a short repayment tenure and cutting down the total number of monthly installments is a great way to reduce the interest payments towards the home loan.
4. Refinance your home loan
In some cases, borrowers have already taken a home loan and are now stuck with high interest rates. It might be better to go for a home loan balance transfer in such situations. By opting for this, a borrower can transfer their home loan to another lender offering a lower interest rate.
So, keep these tips in mind as they can help lower the interest rate of a home loan. It is also advisable to consider multiple loan plans before settling for one.