With the COVID-19 pandemic taking longer to fade into memory, various sectors across the markets.
A home loan is an amount of money borrowed by an individual, usually from banks and companies that lend money. With a home loan you can buy a home and use the money to renovate it.
With the COVID-19 pandemic taking longer to fade into memory, various sectors across the markets are now devising newer methods to beat the slump. The real estate market has struggled with low demand for properties in recent months. To encourage prospective homebuyers, lenders have lowered their home loan interest rates.
Many banks and non-banking companies (NBFCs) have repackaged their home loan offers, announcing a reduction in the interest rate. This trend of reductions is meant to cause an increased demand for properties during the festive season.
While low home loan interest rate will attract throngs of borrowers, one must understand what opting for such deals also entails. This article will tell you whether to take advantage of the low interest on home loans, based on your needs and home loan desires.
Why You Should Not Quickly Switch to a Low-Interest Rate Home Loan?
A home loan is a loan that can be taken for either purchasing a residential property or for taking up some construction work on an existing property.
Choosing the right home loan can be difficult, especially if you’re shopping around for a deal. While it may seem intimidating, buying a home can be fairly simple. This guide will explain the most common types of loans and how they work. We hope you find it useful.
A low-interest rate is enticing. However, if you want to enjoy a rate cut, you should confirm your eligibility. If you already have an active loan, lenders will ask you to satisfy their eligibility criteria before approving the rate cut.
As a salaried employee, you stand a better chance of getting a home loan rate cut than a self-employed individual. Most lenders consider salary earners to be low-risk borrowers. If you belong to this category, lenders will strongly consider your request for a switch.
Your credit score and report matter too. Before taking a loan, you need a convincing score of up to 725. You should also have no history of missed payments for previous loans if any.
A low-interest rate home loan has major implications for you. Aside from paying less than what you usually pay towards a home loan, it will also help you to save money. It also brings peace of mind knowing that you can meet other expenses despite having an active loan.
A quick tip: As you consider switching, we recommend that you utilize a home loan interest rate calculator to weigh your options. This online tool displays accurate information within seconds.
How You Can Make the Most of a Low-Interest Rate for Your Home Loan
Below are three ways to take advantage of the low home loan interest rate trend:
Apply for a Home Loan Balance Transfer
One great way to enjoy the low-interest rates is through a balance transfer. A balance transfer is a financial operation whereby you switch an existing home loan balance to a new lender. To qualify for this action, you must fulfil the new lender’s criteria.
If a new lender promises to charge less interest, you should transfer. Doing so ensures that you spend less towards the equated monthly instalments (EMIs). However, before switching lenders, take time to compare lenders and the deals they are offering. Apart from a low-interest rate, does the new lender offer additional privileges? Ensure that you do your research before applying.
Close Existing Debts
If you currently have a personal loan, car loan, or credit debt, now’s when you should pay them off. Thanks to the reduced interest rate, you have more money to spare. Pay off those debts to boost your credit score and credit rating. Remember, you might want to apply for future loans and you need a healthy score to do so.
By paying less interest, you have high-interest savings. Why not invest in the real estate market and buy another property with interest savings? We don’t know how long these rate cuts will last, so buying a house is a step in the right direction. Mortgages come in various types and can be used to purchase a home or property, which includes land for building, for major renovations or improvements, or to buy a piece of land.
Three Ways to Lower Your Home Loan Interest Rate
Paying high interest can negatively impact your finances and ability to pay other expenses. If you bought a house with a home loan and have begun repayment, other expenses will demand urgent attention. How do you cope?
Below are three ways to relieve the burden of a high-interest rate:
Request for a Shorter Tenor
Having a long tenor of 30 years reduces your EMIs, excluding the interest component. If you want to lessen the interest, opt for a tenor that is shorter and fits your financial goals.
To confirm that this will work, use an online calculator for home loan EMIs. You should find this tool on your lender’s website.
Make Frequent Prepayments
This involves making a lump sum payment towards the loan. This reduces the balance including the interest. Most lenders will allow you to make prepayments at no extra charge.
This privilege applies to individuals servicing floating-interest home loans. If you’re on a fixed interest loan, you can still make prepayments but at a certain charge. We advise you to discuss this with your lender to get their opinion.
When you are purchasing a home, there are different kinds of loans that you can make use of. These include financing options for buying a house as well as options for buying land to build your own home on. Never has the interest rate on home loans been this low. If you’re a prospective homeowner, there is enough reason to apply for a home loan now.
If you have an active loan, why not take a hint from the ideas we offered above? There may not be another opportunity like this one.