6 Effective Ways to Saving Money on Your Home Loan

Shouldering the responsibility of home loan is the biggest financial commitment one takes in life. It is a decisive move of transforming your dream of buying a home into reality without touching your hard-earned savings. However, when it comes to home loan repayments, it becomes difficult to manage the unexpected overheads.

This article throws light on some easy ways which you can look for when you apply for a home loan. This will help you to keep those factors into consideration while keeping you debt-free from all angles.

Improve your credit score and optimize it

A credit score of 700 or above is appropriate for a home loan. The home loan application becomes smoother with such an average score or above. The credit report not only plays a predominant role in sanctioning a home loan but also is a broad criterion depending on which a bank or housing finance company determines to process your application or not. If your credit score is good, you will be offered a home loan with an attractive interest rate. However, you can obtain the home loan financing up to 80 to 90% of the total property cost, only if you have a satisfactory and correct credit score. Individuals with a lower credit score are also preferred by most of the lenders at a slightly higher side of the interest rate.

Negotiate for a suitable interest rate with your loan officer

Many borrowers don’t know that they can use their own credit report for powerful negotiations. You can ask your banker or official representative for getting the current interest rate being offered and ask for getting either the lower rate or waive the processing fees and negotiate successfully for your advantage. Some banks such as SBI offers a lower interest rate of 7.90% p.a. on SBI Home Loan. Similarly, you can look for other banks that can offer you the best deal on home loan products.

Research for the best pre-purchase offer amongst other offers

Try not to apply for a home loan with the bank where you have your savings account. Do thorough research with other lenders as well who might offer a better home loan interest rates on good terms. Examine your options subject to their basic deals and interest rate value. In case you have other home loans going on elsewhere, go for the offers where other lenders would likely provide you with a lower interest rate on home loan transfers. However, you may get multiple quotes from lenders before applying for the home loan. No penalty will be levied in pre-closure of home loans.

Make the best use of the down payment

If you have successfully obtained the lower interest rate, you are required to make the heavy down payment at the first go and also reduce your burden of making heavy EMI repayment later on. Lenders usually ask the borrowers to pay off at least 15% to 20% as down payment and it is a wise option to pay the highest value of loan earlier in order to save money in the long run.

The affordability of a large down payment ensures quick approval of the application and lenders are keen to offer lower interest rates.

Go for the home loan balance transfer

When you go for the Home Loan Balance Transfer, your new bank takes over the home loan from your existing bank. Normally, the bank that takes over the home loan offers you a lower interest rate to the home loan applicant. This will help you to further the lower interest amount and lesser loan duration. Opting for the home loan balance transfer is an easy and effective option for saving interest.

Make additional payments

The additional large payments which you make facilitate the faster and smoother repayment of the whole mortgage value. You can deploy an annual bonus to pay a significant loan amount and minimize a lot on your interest component. This completely affects the principal amount and pushes the remaining balance on a lower side.

The more cash you pay off, you will need less money to finance. However, managing your investments and cash flow is required as it will minimize the unnecessary burden of futile funds. This procedure will help to save on your home loans.

To sum up, home loan repayment can be expensive; you can save money on the interest by taking into account the above factors. You need to be financially committed when it comes to saving money on your home loan. You can even go for either prepayment of your home loan partially or fully can help you save more money. However, you can consider investing if you want to save interest on home loans. Making larger down payment initially will help you minimize the overall interest paid on the loan. Moreover, it inculcates in building the financial discipline to save money in the future.