Some ways to reduce the interest rate on home loans.

Buying your dream home involves a lot of planning, property survey, builder’s reputation, money at stake and lastly cracking a better housing loan deal. When it comes to housing finance the first thing buyers are concerned is the interest rates incurred on your loan. Interest rate play an important role in your home buying decision, when one opts for a housing loan.

You can say it’s a decisive factor. Presently, the home loan interest rates are around 8.50 to 9% mark that looks quite attractive compared to 3 to 5 years back.

Other factors banks or private companies use to determine rates are as follows: Age of customer and the property, repayment capacity, educational qualifications, job stability and income source, number of dependents, co-applicant’s income, assets and liabilities, savings habits, credit history and future inflation costs.

Your interest rates will impact your principal amount, your monthly installment and other fees. So, it’s better to carefully evaluate it before availing a loan. There are several ways to reduce the interest rates all the more.

Some of them would be:

• Women are offered special concession of around 0.5% on home loan.

•  If you hold a good credit score you can negotiate with the private vendors and banks for better home loan interest rates.

• If you hold a joint income with your spouse or parents you tend to get a lower interest rates or higher principal amount as per your requirements.

• If you take home loan when you’re young investors have a faith on you that you’re in a position to pay the debt on time thus you can negotiate on rates.

• Having a suitable job or sound business can help you fetch good amount of discount on your housing loan interest rates.

Experts say borrowers should take into consideration one’s current and future cash flows, while deciding the monthly installments. Banks or private finance firms are also flexible in keeping a lower monthly installment during the intimal years. Higher monthly installment may eat up a major chunk of your earning that could lead to financial distress.

There are several online sites that help buyers calculate home loan interest rates using loan calculator. These calculators give an exact table array of principal amount, interest rates applicable, processing and other charges incurred on your entire tenure of housing finance.  This way you will be prepared before hand on exact EMI and the interest rate that you have to pay on your housing loan.

These days using online aggregator sites you can compare based rates and spreads across various banks and private finance companies on your home loan. If you see substantial scope to reduce the home loan interest you can consider the following options:

Maintain a good relationship with the lender, and then negotiate for low revised rates by paying a one-time fee, being charged by banks or finance firms.  Migrating to another bank or finance company could prove beneficial who often target the potential customers with slashed rates. Remember even a 0.25 to 0.50% on your home loan interest rates can make a vast difference and help you saving lakhs of rupees on the long run.

Here’s how to play smart with home loan interest rates.

Most people think of interest rates as a pain in the neck at the end of every month. For some it makes the entire repayment process a tedious and straining one. But there are many ways to play smart and ensure this cost always plays to your advantage. This article will help you with a few ways to plan for this expense, lower it and save money with it, read on to find out more.

Work on your credit score.
A good credit score gets you quicker approvals and you probably already know this by now. But did you know that credit scores also allow you to negotiate your interest rates too? Yes, if you start working on credit score by making timely credit card bill payments, not exceeding the credit card limit and by making all other debt repayment on time, you can leverage a good credit score in order to get lowered interest rates. The difference might only be a decimal point here or there, but even that can help you save loads of money in the long run.

Save for a bigger down payment.
It’s not alwayshome loan interest rates that are a problem. If your loan amount is large, the interest payable will also be more. If you save more and borrow less, the interest will be calculated on a smaller loan amount and hence you will end up paying much lesser in terms of interest.

The next tip is to always use an EMI calculator.
When you know what you’re up against, creating strategies to come out on the winning side is much easier. If you use an EMI calculator before the repayment schedule starts, you will know just home interest rate you have to pay and hence you can properly budget your expenses to accommodate this cost. This is because an EMI calculator will tell you how much EMI you have to pay each month for the entire tenure of your loan. This knowledge will help you plan you repayment process smartly.

Always keep balance transfers on your mind.
If your interest rates are too high and you want to lower them, then balance transfers are a great option. Many lenders offer lowered home loan interest rates to customer willing to switch lenders and transfer the balance loan amount to them. Most people will say there are too many charges involved to switch, but these charges will mostly be much lesser in comparison to the savings you get from home loan balance transfers.

Use home loan interest rates to save on taxes.
You can use the interest you pay to save on taxes. Under section 24 on the Indian Income Tax Act, you can avail tax deductions up to Rs. 2, 50,000 every year against the interest you pay towards your home loan. This way it’s an expense that helps you save just as much as you pay.

A combination of beforehand preparation, planning and tax savings will help you save loads of money with your home loan interest rates.

How save money with your home loans interest rates.

Most people think their interest rate is robust number. They think what the lender gives them in term of an interest rate is what they have to pay. But there are few ways to save money with your interest rate and this article will discuss some ways to save money & make the most of your interest rate.

Work on your credit score.
Some lender might tell you that you have a poor credit and attach a poor interest rate to your home loan. However, if you work on your credit score by making timely payments toward things like your credit card bill and your loans, your credit score will improve. You can then use this as leverage to obtain a lower interest rate. Even .25% here or there can help you save a good amount of money.

Compare.
Some people go with the first lender they come across. It’s often a lender they trust or heard about or a lender their parents trusted, but this is not the ideal way to go about thing. Rather, it’s advisable to compare the interest rates from many lenders before fixing on a particular lender.

Make higher down payments.
If it’s within your financial reach to make higher down payments then doing so will reduce the loan amount. Since the interest amount is calculated on the loan amount, this will help you save a lot on the total interest you will have to pay.

Choose floating rate of interest.
Floating home loans interest rates start of lower than fixed interest rates. So in the initial years, you can save big. Then even if the rates go up, they might not go over the fixed rate, which means you still save. If the rates go over the fixed rate, it won’t be for the entire tenure.

Switch to another lender.
If you find another lender that is providing lower interest rates, simply shift your loan to that lender. So it’s good to look out for offers on home loans even after you’ve taken a home loan from a particular lender. You might find that even after paying processing fee and loan transfer fee, the lowered interest rate can help you save a good amount of money.

Negotiate.
The interest rate handed to you isn’t something that you can’t negotiate. The lender puts a margin on the base rate that’s stipulated by law. Chances are if you try hard enough, your lender will give in and reduce your home loans interest rates by 0.10 or 0.20 percent.

Use your home loan interest rate to save taxes.
After all these measures, your interest rate will probably at the lowest it can get. But that doesn’t mean you can save any more. Under Section 24 of the Income Tax Act you can avail deductions against the interest paid towards a home loan. This deduction is subject to a maximum limit of Rs. 2 Lakhs

So not only can you reduce your home loans interest rates, you can also negate its cost to your income by using it avail tax benefits. Keep these points in mind when you apply for a home loan, they will ensure you save a lot of money!

Things you need to know about your home loan interest rate.

The interest payable towards a home loan makes some people decide against the loan altogether, it make others pull their hair out at the end of every month, whereas for some it’s just a small price to pay to own a home of your own. But believe it or not this price comes with some advantages and a lot of intricacies. So before you pass judgment on or apply for a home loan, here are some things you should know about the interest payable towards a home loan.

It beats paying rent & helps you invest in property.
Your house loan interest is part of the EMI you pay every month and though it might seem like an expense, it’s much better than throwing away money in the form of rent. The interest you pay along with the principal amount also act like an investment plan. After the tenure is over, you would have a piece of property that not only belongs to you but also would have appreciated greatly over the tenure of your loan. In comparison to renting where your money buys you nothing, taking a home loan & paying interest is a much better choice.

There are types of house loan interest rates.
When you opt for a home loan, you can choose between fixed & floating interest rates. Fixed interest rates are slightly higher than floating rates and are designed to suit risk-averse borrowers. Floating interest rates on the other hands are slightly lower and can fluctuate over the tenure of the loan based on market performance and government policies. This type of home loan interest rate is best suited for younger people whose salary is bound to increase over time.

You can calculate home much interest you have to pay in advance. EMI calculators available online allow you to arrive at the exact interest rate payable for each month of the tenure of your loan. These calculators allow you to know the EMI payable beforehand and thus allow you to better budget your monthly income to comfortably pay back your loan.

You can save taxes with your house loan interest.
Under section 24 of the Indian Income Tax Act, the interest paid towards a home loan can be used to avail deductions from your income. Under this section, Homeowners can claim deduction of up to Rs.2 lakhs per year. If the tenure of the loan is 20 years, you can save up to 40 lakh over the course of you home loan.

You can pay less house loan interest by paying a larger down payment.

If the interest payable against a home loan is worry for you, you reduce it by saving up and paying a larger down payment. Since the interest amount is calculated on the amount borrowed, a higher down payment will result in a smaller borrowed amount and in turn lesser interest payable.

These were some basic pointer you need to keep in mind when you address the topic of house loan interest and it rates.

Few evaluated step can reduce the interest cost.

House loan interest is the lowest in the history of home loan. It varies from 8.4-10% and these lower rates are so tempting that people are joining the bandwagon of home loans with great enthusiasm. But, they forget that it’s about a long and exhaustive tenure and the interest cost they have to pay over the loan amount is also a big chunk. To appreciate the working and self-dependent women many financers offer almost .05% concession in the home loan interest. For the potential borrowers, if you want to reduce the interest cost, few evaluated step in the beginning can reduce the interest cost over the principal loan amount. Along with the principal loan amount & the loan term; the interest rates plays a vital role in your home loan.

To reduce the interest cost, a single step in the beginning can help you a lot. Once you decide to take a home loan, try to arrange maximum amount for the margin money because it will reduce the principal loan and that will help you to reduce the interest cost; easing your debt burden.

Next important thing that plays a crucial role in determining your interest cost is the loan term. Though longer tenure would reduce your EMI charges, but in the end of the tenure when you calculate the interest cost, the interest cost expenditure increases a lot. So it’s better to pay higher EMIs for shorter tenure than lower EMIs for longer tenure.

The vital factor that determines the interest cost is the house loan interest; it has a major role in determining the extra chunk you have to pay for the home loan amount. Since every customer has different financial profile, in order to ease the loan burden and help the borrower to maintain a good credit score financers offer three types of interest rates: fixed, floating/adjustable and combination of both or truly fixed rate of interest.

If a borrower opts for a fixed rate of interest, he/she will have to pay little higher rate which is 1-2% higher than the floating rate. Though they have to pay more but they enjoy a stable monthly expenditure for their EMIs and interest cost, which will not increase if the market suffers from inflation and the rate of interest increases. The rates are fixed for the whole loan term.

If the borrower chooses a floating interest rate, then the rates adjust itself depending on the financial health of the economy. In the present scenario when the markets are enjoying the good health, the rates are decreasing and are lowest in home loan history. The borrower gets a scope to save some amount of money, which may help them with early payment of the loan amount by increasing the EMIs in future and decreasing the loan term. Lower rates help in reducing the interest cost.

There are some borrowers who may face the dilemma in choosing between the two rates, owing to stable income, they may not be able to handle the fluctuation initially if the rates increase. To make the loan repayment option simple, some financers offer a combination of the two aforesaid rates. In the initial years the borrower has to pay a fixed rate of interest for committed period of time after that it switches to floating rate of interest.

Evaluate each important factors especially the ones that affects the interest cost and consider your affordability, financial stability & profile before joining the home loan bandwagon. Give special emphasis to the house loan interest before selecting one.

Fixed vs. floating an eternal dilemma.

Remember the famous phrase from Hamlet,” to be or not to be, that is the question”, same is the dilemma when you have to select in between the fixed and floating housing  loan interest rates. When you approach a financer with your working co-borrower; with a good credit score, stable income to pay your EMIs in time and fulfill other eligibility conditions, you loan is approved by the financer without any hassle. The catch-22 situation is when you have to select from fixed or adjustable rates, because of their set of advantages and disadvantages. This article may help you to know the benefits and drawbacks of the housing loan interest rates and choose your suitable rate.

Considering various aspects of the interest rates in the current market scenario it is worth finalizing a particular rate of interest. Since it the most important aspect of any loan getting it right is the key to a burden free debt without any financial stress and default over time. Nothing comes free in this market, if you want to enjoy some privilege you have to bear the consequences also. So benefits and drawbacks are two sides of same coin. Same thing is applicable for the housing loan interest rates.

In case of fixed loan the rate of interest is fixed for the whole loan term irrespective of the market condition or government policies. This is can be a benefit for you if the financial health of the market degrades and the interest rate rises, because you will pay the same rate. In dire situations the rate may increase a bit. Now if you are a risk averse person and not ready to compromise with the stability of your monthly budget and mental peace, then you will go for fixed rate of interest. Though this rate is bit higher than the adjustable rate but easily assimilates in your monthly budget without any fluctuations and gives you mental piece.

Floating rate of interest is lower compared to the fixed rate if you notice the present market scenario it is the lowest in history. These low rates cut your interest cost. This adjustable nature is beneficial for you when the rates decrease with healthy market condition and government policies. If the rates increase then you have to pay high rates. In order to get lower rates you may face the effects of rising interest cost in future with increasing rates. Lower rates in present may help you save for future fluctuations, when the rates climb up.

To deal with the borrowers’ ordeal some banking and non-banking financers have come up with a combination of the fixed and floating rate of interest. It is termed as truly fixed or semi-fixed rate. The financers offer the loan at a fixed rate for a committed period of time and then switch the rate to floating rate. It is ideal for the beginners who needs time to prepare themselves and adjust their monthly budget with the rate fluctuations till then a fixed rate eases their burden.

As a borrower you can better understand your requirement and affordability. The monthly EMIs absorb 30-40% of the monthly expenditures, and the interest rate plays a vital role in deciding the EMI. So if you are risk averse then go for fixed rate, if you are prepared for the fluctuations then go for floating and if you are confused and need time to decide then go for a combination of rates. After all it’s your loan and EMI; you know your financial profile better and can craft the budget accordingly.

Do you know interest cost can be reduced?

The home loan can help people to accomplish the dream of buying a home. It is a long term liability that stays with the borrower for decades. Home loans interest rates are the most critical thing that the borrowers consider before applying for the loan. A slightest difference in the rate can translate into significant differences in the interest payout. Another important part of the home loan is the EMI, the borrower has to pay. The EMI makes 30-40% of monthly expenditure. To ensure that this monthly expense remains within the affordable limit customer opts for longer repayment tenure.

Home loans interest rates is the amount of extra money the borrower pays to the financer for the loan amount. For instance if the borrower takes the loan of Rs 40lakhs at 8.5% rate of interest per annum for ten years, then the borrower would pay Rs 3,40,000 approximately at the end of the loan repayment tenure as the interest cost.

This interest rate is classified under three heads:

• Fixed rate of interest: as the name suggests, it is fixed for the whole loan repayment tenure. A risk averse customer who believes in stability opts for this rate, as their monthly budget fixed for EMI remains the same unaffected by the market fluctuations and government policies. It is slightly more than the floating rate.
• Floating rate of interest: it is also termed as adjustable rate. The market economy has a direct impact on this ROI. It reduces with healthy market condition and increase with inflation. Government policies also affect the floating rate. The monthly EMI fluctuates with the fluctuating rates. Customers who like to take chances and are ready to pay the higher rates during inflation in order to enjoy low rates in the healthy market economy.
• Truly fixed or semi-fixed ROI: this interest rate is fixed in the initial period for a committed time, after that it switches to floating rate.

From the above rates the borrower can choose any kind of rate. They can switch to other kind of interest rate from the existing ROI with some minimal charges depending on their needs. Interest cost is crucial; this chunk of amount can dig a hole in your wallet. Crafting the loan tenure and the EMI diligently can help you save chunk of money.

Considering some factors may help you reduce the interest cost on the home loan from the financer.

Shorter tenure: in shorter tenurethe principal amount is repaid faster. The home loans interest rates are calculated on the outstanding loan amount thus quick repayment results in lower interest cost. Longer tenure increases the interest cost, though the interest rate is low.

Pay an extra EMI every year:incase the monthly budget does not allow any increase in the monthly EMI to reduce the tenure; you may use annual bonuses and other savings to pay at least an extra EMI every year, this may reduces the interest cost by reducing the loan tenure.

Increase the EMI by 5% each year: another smart choiceto reduce the interest cost is to increase the EMI by 5% with increase in income.

It is always beneficial to reduce the interest cost burden. You already have to pay loads of money for the principal amount, and increased interest cost will make the loan tenure exhausting for you. So plan accordingly to save yourself from being a defaulter.