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How to reduce home loan EMI

July 9, 2020

how to reduce home loan EMI

How to reduce home loan EMI?


Do you have an ongoing home loan or looking to apply for a home loan? Then one thing is for sure that EMI will end up coughing up your monthly budget for a long time.


Thus, won’t it be better if you can reduce your home loan EMIs by implementing some methods and handle expenses accordingly?


Yes, that’s what we are going to discuss in this post that you are going to go through! Read on!


Follow these tips on how to reduce home loan EMI


Tips for reducing housing loan EMI for existing home loan borrowers


Request for an extended tenor


If the home loan tenor means paying reduced EMIs, then it would be better to have the loan repayment tenor extended in lessening the EMI burden. But doing that would mean getting it restricted with your current creditor. And it may be considered as a rewriting norm. It may further affect your loan credibility and CIBIL Score. But you can still request your lender to give you an extended tenor. It can help you reduce your loan EMIs. If it does not, then you can always go for the home loan balance transfer facility.


Go for a home loan balance transfer


If you are an existing home loan customer, then you can go for the home loan balance transfer facility at a lower rate. Opting for a home loan balance transfer from one lender to another may cost 1% of the existing outstanding as the processing charges. If you calculate the amount less than what you can pay as the processing costs, then you can go for it. What’s more, leading lenders also let you enjoy a top-up loan to meet other needs with the facility.


Make part-prepayments every year


You can also make some part-prepayment towards your existing loan every year. It will bring down the rates and EMIs. This way, you will be able to pay off the loan in less number of years. But before you do that, ensure checking out the charges for availing the facility.


Negotiate home loan rates with the repo rate cut


Many times, there is a repo rate cut by the Reserve Bank of India. It is done to make home loans and other debts affordable for borrowers. But that does not mean only new customers can make the most of it. Yes, you can request your existing lender to readjust your home loan rates to new rates. It can assist you in reducing your loan burden. But if it does not do, then you can always go for the home loan balance transfer to a lender who is obliging.


Tips for reducing home loan EMI for new home loan borrowers


Go for a longer home loan tenor


New home loan borrowers can reduce their upcoming EMIs by going for a longer tenor. It will not only help reduce your loan EMIs but even increase your loan eligibility. But one thing to remember is that opting for a longer tenor will mean having debt on your head for a long time. And you will also end up paying more as interest charges. But you can manage that by making some prepayments and putting a bigger down payment. It will be suggested to employ home loan EMI calculators on the lender’s website for free to know your exact EMI amount.


Put down a bigger down payment


No lender will finance the entire cost of the home that you want to buy, and it may be between 80-90%. The rest needs to be arranged on your own. And it is what is known as the down payment. Most of the lenders would want you to put down at least 20% as the down payment. But you should try to put as much down payment as you can. Why? It will help you start paying lower EMIs on the remaining amount. Suppose if you pay a 40% down payment, then you will only need to worry about the remaining 60%. You can always stretch it for a longer period and pay significantly reduced EMIs. What’s more, if you pay more as a down payment, then it assures the lender of your income. It sanctions the loan application faster, considering you won’t have issues in making timely EMI payments.


Ensure to shop around for the best loan rates


The next thing that can help you opt for reduced home loan EMIs is checking out multiple home loan offers of lenders. Why? It will help you go for the best one as per your needs and repayment capacity. You can do that by landing on a third-party site. This way, you can know the best available home loan offers and then pick one. It may help you go for the best rates on it and help you save on monthly EMIs.


Try putting it 1-2 extra EMIs per year


If you are a salaried professional, then you must be getting your year bonus, along with the appraisal. You can use the bonus to put down 1-2 extra EMIs per year to reduce your home loan rates and pay lower EMIs. This way, you may be able to clear your loan some months/years before. You can also use the percentage of the appraisal to start paying increased home loan EMIs and reduce the burden.


Make lumpsum payments every 1-2 years


Home loan EMIs are something that will continue to cough up a portion of your income for long. But if you have some policy or ventures maturing, then you can use the returns to make lumpsum payments towards it every 1-2 years. This way, you will end up saving on interest charges and pay lower EMIs.


Go for a PMAY home loan and save on interest subsidy


The next thing is that you can apply for home loan via the Pradhan Mantri Awas Yojana (PMAY) and save up to 6.5% as an interest subsidy on the availed finance. This way, you can save up to Rs.2.67 lakh on interest charges as per your income groups. If you are earning between Rs.6 lakh and Rs.18 lakh, then you can avail of a home loan of up to Rs.12 lakh to save. The loan amount above Rs.12 lakh won’t be subsidized. You also need to be aged between 24 and 60 and have a valid Aadhaar number for being eligible. Also, it must be your first pucca home in India to apply for the PMAY scheme.


You can use the PMAY Calculator to know about the exact interest subsidy on your home loan. It can also let you know the exact EMIs that you will be paying post-subsidy deductions.


You are now aware of some easy ways that you can implement to start reducing your home loan burden without issues. What are you still waiting for? Start following any of them and see your home loan EMIs getting reduced the easy ways!    


Frequently Asked Questions
What is home loan EMI?
The money that you avail to build or buy a home from a lender needs to be repaid over a tenor. The money is divided into total number of months. The money that you pay per month over a tenor is called an EMI.

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