How can I reduce my home loan amount, There are various ways to reduce the cost of a home loan, including seeking a shorter loan term.
Which bank is very low interest rate
When trying to buy your own home, you need to plan the home loan process properly. From choosing the right bank to avail the loan to getting a favorable interest rate, there are many aspects that are important. You should also try to minimize the cost of the home loan.
Various factors besides the interest rate affect this. Especially now that the Reserve Bank has announced that the repo rate will remain unchanged, there is no chance of an immediate reduction in interest rates. In this context, let’s look at ways to reduce the cost of a home loan.
housing loan repayment period
The loan term can range from 10 to 20 years. This is determined based on several factors, including the borrower’s age and income. Generally, the shorter the loan term, the higher the monthly payment. The longer the loan term, the lower the monthly payment.
Many people may want to opt for a longer term to reduce their monthly payment burden. However, when opting for a longer term option, the total interest payable will also be higher. The impact is even greater when compound interest and inflation are taken into account over many years.
home loan repayment increase
Also, the impact will be greater since the initial installment is higher than the principal. Therefore, it is advisable to seek a short-term option even if the monthly installment is higher. You should plan ahead to deal with the installment burden.
By choosing a short term, you also have the option of extending the term later if needed. By paying a higher installment from the beginning, you can pay off the loan faster and reduce interest costs.
Those who cannot afford a higher monthly payment can opt for a longer term of 15 to 20 years, but can follow the strategy of increasing the installment amount whenever possible.
Especially for young people, you can increase the installment whenever your income increases. This will help reduce the principal and reduce the loan term and interest accordingly. You can also try to save the excess amount and pay a part of the principal in advance. Amounts such as annual bonuses can be used for this.
Since a home loan is a long-term commitment, it is necessary to get insurance along with it. However, although most banks provide insurance with the loan, it may be advisable to seek term protection separately.
Since it is linked to the loan sold by banks, it has limitations. If you transfer the loan to another bank, you cannot transfer the insurance. Therefore, getting separate insurance may be more convenient and reduce the cost. You should also understand the interest rate calculation aspects well.
About The Author
