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The Home Loan Transfer - An Effective Way To Reduce The Interest Burden
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Buying a home is top on the priority list of every Indian.
Real estate and gold have continued to be a favoured investment option. With real estate prices skyrocketing in metros and Tier I cities, it has become imperative to look out for financing options and Housing Loans prove to be just the right tool to help you own your dream home.
The burden of the home loan is primarily because of its interest component, spread over a period of 10 to 20 years, your home loan repayment will be far more than the principal sum borrowed.
Is there a way to reduce the interest burden and thereby lower the Home Loan tenure?
Following are some of the ways by which you can reduce your Home Loan EMI through reduced interest rates;
Take a Joint Home Loan
Your eligibility for Home Loan is entirely dependent on your income and repayment capacity. When you apply for a Home Loan jointly, with your spouse/parents/children, you will be privy to a larger quantum of financing. With the risk attached to the repayment lowered, by virtue of joint holders, the lending banks offer you a rate of interest which is definitely lower than that offered to single loan applicants.
If you’re in need of a housing loan, apply jointly and gain access to funds at a much cheaper rate.
Apply for a Home Loan Transfer
Housing Loan interest rates vary across banks and financial institutions. The rates charged by NBFCs are low compared to those charged by banks. If you’ve availed a home loan from an NBFC and are feeling the pinch, you can have your home loan balance transferred to other lender that charges a lower interest rate. Among banks too, there is a variation in the interest rates. Even if one bank charges 75 basis points less than the other, refinancing proves beneficial in mitigating the interest outflow.
Of course, a home loan transfer entails costs; transfer fees and processing fees. If the savings are more than the costs, then a balance transfer is the best alternative to reduce the interest burden.
Refinancing option is a viable option especially when a large part of the loan is pending for repayment.
Floating Interest Rate
Interest rates fluctuate as they are driven by market forces like the repo rate and cost of borrowings. When the interest cycle is hitting a downtrend, you stand to gain in terms of lower interest rates. By choosing a floating rate of interest home loan, it is possible to reduce the interest load on the home loan.
Switch to MCLR
As per the latest RBI guidelines, all housing loans disbursed after April 2016 should be based on the MCLR, Marginal Cost of funds Lending Rate. This rate is directly linked to the repo rate and a fall in repo rate brings downs the MCLR as well, thus making home loans cheaper.
In addition to the above, your negotiations skills and credit history play a vital role in enabling you avail a home loan at lower interest rates.
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