Purchasing a home is a significant milestone, and securing a home loan is a common way to fulfill this dream. However, the interest rates associated with home loans can significantly impact the overall cost of borrowing. To reduce the burden of interest and make your home loan more affordable, consider implementing the following strategies. 

Opt for a shorter loan tenure

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The duration of your loan tenure is a crucial factor affecting the interest you will pay. While longer tenures of 25 to 30 years may lower your monthly installment, opting for shorter tenures of 10 to 15 years can substantially reduce the overall interest payable. Use a home loan EMI calculator to visualise the significant reduction in interest for loans with shorter tenures. Carefully choose the loan tenure to avoid paying higher interest over the long term.

Consider prepayments

On floating-rate loans, lenders typically do not charge prepayment or loan foreclosure fees. Take advantage of this by making periodic prepayments on your loan. During the initial years of your loan, a significant portion of your payments goes towards interest. By making regular prepayments, you can substantially reduce the principal amount, leading to lower overall interest costs. Be aware that lenders may charge a percentage on prepayments for fixed-rate loans. Check with your bank or lender to understand the applicable prepayment charges.

Check if your lender allows you to revise your monthly installment annually. If you experience an increase in income, consider opting for higher EMIs to shorten the loan tenure. A reduced tenure will lead to lower overall interest costs throughout the loan period. Consult your lender to explore such options.

Compare interest rates online

Thoroughly research loan products and compare interest rates from different lenders before finalising your decision. Utilise third-party websites that provide comprehensive information on rates and charges levied by various lenders. By comparing home loan interest rates across different banks, you can identify the most competitive offers and choose the one that best suits your needs.

Lenders often offer preferential rates to customers with a solid credit history. If your credit score is near 800 and you have maintained a responsible repayment track record, you may be eligible for better rates on your loan. Additionally, maintain a good business relationship with your lender to negotiate lower interest rates. Keep an eye out for festive offers, as banks frequently lower their interest rates during such periods.

Home loan balance transfer as an alternative

Home loan balance transfer becomes a viable option once you have started making prepayments on your loan. If you believe that your current lender's interest rate is too high, you can transfer the remaining principal amount to another bank or lender offering a lower interest rate. However, consider balance transfer as a last resort, as missed payments on balance transfer loans can result in higher penalties. Explore this option only if you have exhausted all other possibilities.

Make a larger down payment

Instead of paying the minimum required down payment, consider contributing more from your savings as a down payment. Most financial institutions finance between 75% to 90% of the property value, leaving you responsible for the remaining 10% to 25%. A higher down payment will lead to a lower loan amount, directly reducing the interest you need to pay.