5 Tips to make your EMI affordable for Home Loan

Mr Shah had recently purchased a 2 BHK flat in the suburban area of Mumbai. The flat cost him around Rs1.20cr including taxes. Besides saving and income from existing flat sale, he had to take a loan of Rs45lakh. Now the biggest burden he faces every month is the EMI which takes away 35-40% of his monthly salary. With the ever increasing interest rates, home buyers like Shah are having second thoughts on purchasing expensive homes. Banks are continuously fluctuating the interest rate and with some strict government policies, it has become much harder to get low interest rate home loan. To keep EMIs affordable and also purchase the dream house, people usually go for long tenure home loans. However, many are clueless that the more long-term loan you apply for, the more interest you pay.

The best thing to do when it comes to buying home loan is to seek expert guidance that will help in getting all the assistance for the home loan and EMI payment. It makes it easier for you to plan the EMI and monthly expenses without facing any problem. It’s not that you cannot decrease your EMI rate, there are ways to follow to make sure you don't end up paying extra interest. Let us check some of the methods of bringing down the EMI rate from your housing loan:

• By Paying One more EMI per Year:

You can do prepay amount equivalent to 1 EMI per year and above regular EMI payment. This extra EMI can be paid through your annual bonus or other savings. For example, if you have taken Rs 50 lacs of loan for 25 years that costs you around Rs 45,435 per month. You can do additional prepayment of the similar amount per year. So you can end up paying your loan in 229 months itself. However, it is important to do a proper calculation using home loan EMI calculator to get perfect ideas about the monthly EMI or pre-payment you will face.

• Short-Term Loan:

As mentioned above, the long-term loan will make you pay extra EMI from the usual interest rate you are paying. The short-term loan will ensure reduced long-term financial commitment. A 15-year loan is quite affordable compared to 20-year home loan, which will also result in the lower interest rate. Moreover, the principal amount paid is fast leading to a lower interest rate.

• Increase your EMI by certain % every year:

You can increase your EMI payment rate yearly as your salary and other saving options increases. For instance, your salary increases by 10% per annum; you can increase the payment interest by 5 %. This will also help to repay your EMI within few years, rather stretching it for too long.

• Paying up the Principal:

The best way to reduce the EMI rate is by paying the principal as quickly because lesser principal amount, lesser will be the interest rate. If you are carrying extra cash with you, then give it to the bank to get your principal amount reduced.

• Comparing of Interest Rates:

Different banks and finance lending institutes offer EMI in different interest rates for the home loan. So before jumping to the conclusion or finalizing the bank for the home loan, do compare interest rates of each. If your existing bank doesn’t bring down the interest rate, then research for the bank offering home loan under lower interest rate.

Summary: These are certain tips which you can follow when looking forward to home loan and want to reduce EMI pressure to a certain extent. Government is offering CLSS benefit for affordable home buyers, which further brings down the cost. Having a proper planning before opting for the home loan is the best way to ensure you get affordable EMI.