The RBI has instructed the country’s financial institutions to lower their interest rates, through consecutive cut-downs in its benchmark rate. However, the financial institutions only modified the lending rates and did not immediately reduce them. There are numerous reasons why the lending authorities are not passing on the rate reduction to their borrowers.
Firstly, interest rates on CASA have remained unchanged. Secondly, while the Reserve Bank cuts down interest rates, there is no corresponding reduction of rates for competing products such as small savings scheme. Moreover, commercial institutions use the repo facility only when the liquidity situation is tight. Hence, the reduction in repo rates will bring down their fund costs.
Borrowers have to devise strategies in order to get lowest home loan interest rate. You can use a home loan interest calculator to determine the most suitable home loan and lender. However, there are more effective tips and tricks to reduce this home loan interest hike. Take a look at these measures –
Increase EMIs and retain tenure
Housing loans are secured loans and thereby offered by lenders with the least possible margin. However, the long tenures mean that even a 10 basis point or 0.10% change means a substantial amount throughout the tenure.
If interest rates increase, most lenders extend the repayment tenure instead of increasing your EMIs. Even if a borrower does not feel the impact at once, his/her interest burden will mount up as the tenure increases. Instead, you must insist on your lender to increase your EMIs and reduce the tenure. This will substantially check the interest out-go over the entire tenure.
You can use a home loan EMI calculator to calculate your EMIs beforehand and prepare your budget accordingly for repayment.
Think before switching
If you are considering a home loan balance transfer to a new lender offering lower interest rates, switch within the first 3-4 years when the interest amount of EMIs is high. This can help you bring down the overall cost of interest amount throughout the tenure. Look for lenders offering the best home loan rates before making the switch. This is why you should opt for a home loan balance transfer after conducting a proper cost-benefit analysis.
Make part prepayments
You can also consider reducing your home loan interest burden by making part-prepayments whenever you have surplus funds in hand. The savings you made on the payable interest could be more than the makeup for the interest you have to forgo. Thus, paying off a part of the loan principal will have a significant impact on the interest payable and the tenure as well.
Opt for a floating rate of interest
For first-time home loan borrowers, it is advised to opt for a floating interest rate of interest in case of a lowest home loan interest rates hike. Borrowers opting for a fixed rate of interest are stuck with their credits and refinancing is not a great option either, as fixed interest rates are subjected to foreclosure charges, making the loan a costly proposition.
Keeping these strategies in mind and following these steps, you can easily avail a best home loan in India at the best interest rates. You can consider borrowing from lenders that offers competitive home loan interest rates, flexible repayment tenures and other industry-first benefits.