The current home loan interest rates have been on the rise owing to the increase in the RBI’s repo rate. This rise is causing the monthly payments to skyrocket for those with a home loan or those who are looking to take up a home loan. While home loan interest rate comparison is the prudent way to zero in on the best home loan deal, many often fail to consider this option. Besides this, there are various other ways you can deal with the increasing home loan rates so that you can your monthly repayments stay at an affordable level.
Firstly, you can opt for the balance transfer option. This is an excellent way if you want to reduce your rate of interest. However, it is crucial for you to keep in mind that you might require paying some of the charges even. Another option is to make additional principal payments every month. This would assist you to pay off your borrowed loan quickly and save on your funds over the long term.
Lastly, you can try and negotiate with the lender. If you hold a strong relationship with the lender, they might be willing to work with you to reduce your rate of interest. This is a prudent option to go for if you are struggling to make the repayments on time. No matter what your decision is, it is necessary for you to act soon.
Here’s a detailed list of tips to ease off your pain of making the loan repayments –
How can you make your repayments of home loans easier?
Refinance to shorter repayment tenure –
One of the prudent ways to reduce your monthly repayments is to refinance your borrowing to shorter repayment tenure. You will pay a higher amount every month, however, you may be able to save considerably on the interest constituent of your loan EMIs. Secondly, you will make your home loan repayments quickly. Additionally, a shorter repayment tenure on a home loan has a lower rate of interest than the rate of interest on home loans with a higher repayment tenure.
Also Check: Current Home Loan Interest Rates
Prepaying home loan –
If you hold the financial potential, you can make lumpsum payments on your home loans. This would assist you to lower your loan repayment tenure and save up on interest constituents.
The next way for you to reduce your monthly payment is to go for biweekly repayments. Paying your home loan biweekly is the same as making one additional monthly payment every year. With this kind of repayment plan, you can make half a repayment on every 2 weeks.
Shop around to get the best deal possible
With the rate of interest on the rise, you need to shop around to get the best possible home loan deal. Once you have reviewed your home loan eligibility, the next measure for you is to compare the distinct home loan rate of interest offered by distinct financial institutions and banks. After figuring out the best rate of interest, it is time for you to negotiate your home loan with the lender. Make use of the online comparison instrument to view what other financial institutions are providing. This would assist you to negotiate a better deal on a loan with the current lender.
Consider your investments and saving to better deal with the increasing home loan interest rates –
Investing in savings as well as lowering the debt must be your priorities in case you are concerned regarding the increasing home loan rate of interest. This would assist you to decide how much additional funds you would require to put towards your home mortgage every month. It will even assist you to determine if you require selling your investments to get some additional funds.
When the home loan rate of interest rises, your investment and savings portfolio may be impacted. Here are some of the essential measures you must consider for assessing your situation.
∙ Decide how much additional funds you would require to pay every month as an outcome of the higher rate of interest. This would assist you to evaluate whether you need to make changes to your existing budget or evaluate your strategy.
∙ Assess your savings goals. Ensure to understand if you are on the correct track to reach a goal or do you hold any adequate cash reserve for covering up unanticipated expenditures. If not, you might require adjusting your plan linked with savings to compensate for the enhanced expenses of borrowing or reconsidering your investment and savings strategy to ensure you are well-prepared for unanticipated financial challenges.
Balance transfer option – Should you consider going for it?
The rate of interest on a home loan is subject to the market condition. At times, it even happens that the rate of interest that you are paying is higher compared to the existing rates. In such scenarios, you can go for the home loan transfer option. This is a prudent process where you can simply consider transferring your outstanding balance on a home loan from one lender to another.
If you are unhappy with your existing lender, you can consider transferring your home loan outstanding to another lender to reduce your rate of interest. This is called the balance transfer option. The major advantage of the home loan transfer option is that you can simply save a considerable fund over the long term. This is because you will be paying a lower rate of interest on your loan.
The next advantage of the home loan transfer option is that you can even take up the top-up loan and the amount on the top-up is based on the property’s value. Note that, after factoring in the transfer expense, you must make sure that there’s a difference of nearly at least 50 bps to justify the switch.
Variable interest rate home loan or fixed interest rate home loan – Which option must you select?
The answer to this depends on various parameters involving your risk tolerance level or financial situation. In case you are comfortable with a little bit of risk linked with your financials, a variable rate of interest might be an excellent decision. A variable rate of interest is often lower than a fixed rate of interest, so you might end up paying a lower interest constituent overall. In contrast, if you prefer having stability in repayments, then you may opt for a fixed-rate home loan.