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Tips to Reduce Home Loan EMI

A home loan is a high-value loan and hence, it becomes important to know how to reduce home loan tenure by increasing EMI. This approach lowers your overall interest payment. However, since a large EMI can hinder other goals you may want to know how to reduce home loan EMI instead. You can try using a home loan EMI calculator to know the EMI if you can. The fact is there are several ways to reduce your home loan EMI, and when evaluating them, you need to know the answers to questions such as:

  • How to reduce home loan interest without shifting lenders?
  • Can I reduce home loan EMI through a balance transfer?
  • When making a home loan prepayment, reduce EMI or tenure?

Read on for some clear tips on how to reduce your home loan EMI.

Reduce Home Loan EMI as an Existing Borrower

If you already have a home loan, here are some tactics you can try.

1) Negotiate for Better Terms

Based on your existing relationship with your lender and your repayment track record, you can request for a lower home loan interest rate. This would imply a direct EMI reduction, so much so that you could later find out how to reduce home loan tenure and still stay on budget.

2) Refinance your Home Loan

Carrying out a balance transfer is a top way to benefit from lenders offering a lower interest rates, those willing to extend your home loan tenor, or both. Before the home loan balance transfer, however, do a cost-benefit analysis to verify that your interest savings outweigh the balance transfer costs.

3) Make Part-prepayments

When you make a prepayment, you pay a portion of the principal early, bring down the overall outstanding amount and, hence, can reduce the EMI or the tenor. 

Home Loan Prepayment Reduce EMI or Tenure

  • Reducing the EMI gives you immediate cash in hand
  • Reducing the tenor gives you slightly better interest savings at the end of the tenor

How to Reduce Home Loan EMI as a New Borrower?

If you are a new borrower, adopt these tactics.

1) Select the Best Lender

Scout for a lender offering the lowest home loan interest rate and other charges.

2) Pick the Right Loan

Opting for a floating-rate loan makes it possible for you to benefit when the interest rate dips. BHFL offers repo rate linked interest rates as per internal underwriting policy.

3) Make larger down payment

Lender finance up to 80-90% of the property’s value, leaving the balance 10-20% for you to service by means of a down payment. Nevertheless, a question you should ask yourself is, “Can I reduce my home loan tenure, EMI, or both by making a larger down payment”? If you can, do so and reduce your debt.

4) Choose a Long Tenor

When avail a Home Loan, you can opt for a long tenor to make your EMIs small. However, to avoid overpaying, ask yourself, “Can I reduce home loan tenure by a little bit?” The idea is that a smaller tenor implies a lower net interest payment, though it increases your EMI amount.

5) Go for a step-up/ step-down plan

Such a scheme allows you to pay lower EMIs in the beginning or towards the end and is beneficial for young-earners and those hitting retirement, respectively.

Now that you know how to reduce home loan EMI, play your cards well to meet your housing and other important goals!