It goes without saying that a home loan is one of the major financial commitments of one’s life. All of us dream of owning our own home in the long run, and it is certainly the greatest asset one builds. Since the amount is usually on the higher side, the interest is also quite hefty; consequently, it becomes pretty challenging to pay off a home loan.
By following the tips below, you can save money on home loan repayment
- Prepay the loan amount- this is an effective means of lowering the interest to be paid. However, if you are considering home loan prepayment, you have to be financially disciplined and committed. It should also be noted that in case of floating (adjustable) interest rates on home loan, you need not pay pre-closure charges. On the other hand, for fixed rates of interest, a penalty or fee needs to be paid.
- Ask for a lower interest rate- it is always advisable to negotiate on the rate of interest with the bank, as that is a sure-shot way to save money. More often than not, banks offer a lower interest rate to old and loyal customers.
- Do the research in advance- adequate research is mandatory before applying for a home loan. You are quite likely to discover that two banks are offering the same interest rate, though the application fee and other charges may vary. By researching thoroughly, loan applicants can save a good deal of money. You can also compare the different home loans available across various online marketplaces and take your pick according to your specific requirements.
- Make investments- it is a good idea to start investing in different schemes; it will amass a considerable amount for the down payment of your home loan down the line. By paying a huge chunk in the form of down payment, you can lessen the loan amount, and consequently the interest rate will also reduce as a result.
- Transfer the home loan balance- the process of home loan balance transfer entails that another bank can take over the home loan from the current bank. In most cases, the bank that takes over the home loan, offers a lower interest rate to the applicant. Thus, you can enjoy a lower interest amount and shorter loan tenure. If you are looking to save interest on your home loan, a home loan balance transfer is quite an easy and effective means of doing so. However, do check whether the cost of transferring the home loan to another bank is worth it in terms of your savings on interest in the remaining loan tenor.
It is important to keep in mind that you can be at a highly advantageous position in terms of saving by prepaying your home loan to the maximum, making investments and channelizing the income in a more prudent manner. This will ensure that in spite of having to service the loan for a predominant period of your working years, you will still be able to save some money without putting your regular expenses/budget at stake.