When one avail of a mortgage loan, be it a home loan or a loan against property, the financial commitment it creates is significant. Given the high financing quantum of the principal amount and a long repayment tenure involved, the total loan liability is automatically enormous. Combine to it the interest rate levy, and the EMIs payable can easily throw you out of budget if the borrowing decision is not well-scrutinized initially. One of the most effective ways to do so is to look out for options that can help reduce the overall mortgage loan interest burden.
These are various ways one can utilize to bring about the interest charge down to suitable affordability based on the income and repayment capacity. It is essential that you consider all these aspects and make use of a few smart tips to arrive at a loan liability where the interest levy is the lowest.
Top 6 Handy Tips for Interest Reduction on Your Mortgage Loan
Compare lenders before finalizing
Today, a vast number of financial institutions offer advances like loans against property and home loans at varying mortgage loan interest rates. While some may turn out costly, an acute comparison of interest rate levies from different lenders can help you find a suitable loan offer that attracts the lowest rates.
To find the best rates on your mortgage loan, you can also look out for festive and seasonal offers, which more than any other aspect, often stress reduced rates. It can thus help secure better rates on the advance as well.
Apply with a co-borrower
When availing of a mortgage loan, you can apply for an advance with a co-borrower too if he/she holds high creditworthiness. It will allow lenders to assess the loan application based on the combined income and repayment capacity of both individuals, thus improving chances of approval with reduced rates due to risk minimization on lending.
However, for an individual to be a co-borrower in a mortgage loan, he/she must be a co-owner of the property being mortgaged too. Some lenders also specify the relationships that are acceptable for the purpose. Co-borrowing can be a great option when you wish to reduce the repayment liability as well.
Opt for a small repayment tenure
Contrary to the common belief that a long tenure makes repayment affordable when it comes to interest levy it works differently. It is true that long tenure can help divide the entire loan liability into more months, thus bringing down the EMIs payable.
However, what often remains elusive from the borrower’s sight is that a long tenure means a higher interest charge as well even though the mortgage loan rates are low. It is due to the involvement of extended duration as loan tenure than otherwise. Thus, when looking to reduce interest charges on your mortgage loan, it is always wise to opt for a short tenure. Keep in mind that it will also push up your EMIs and prepare to accommodate finances in your monthly budget accordingly.
Keep the loan amount requirement in check
The total interest payable is basically a compounded value, with the loan tenure, amount, and interest rate being the contributing factors. Thus, when it comes to choosing the mortgage loan amount to avail, you must know that a higher loan value will attract higher interest accumulation and vice versa. So, even though the mortgaged property makes you eligible for a high sum as a loan, you must discreetly consider its impact on your finances and avail funding accordingly.
Utilize available prepayment options
Prepayment is a facility that allows you to reduce your loan burden earlier than scheduled through a lump sum payment. It can be of two types, namely part-prepayment and foreclosure. Under the first, you pay only a part of the outstanding loan liability before the tenure’s end. The latter allows you to repay the entire loan liability at once, affecting the closure of the loan account as well. Opting for either of the facilities can help reduce your interest liability.
Transfer outstanding loan balance to a new lender at reduced rates
Lenders allow you to transfer the outstanding balance of your mortgage loan to a new financial institution offering reduced rates and other favorable terms of financing. It can help save on the overall interest and loan repayment liability significantly.
Alongside, you can also work on credit score improvement beforehand to improve the overall creditworthiness for easy approval at reduced mortgage loan interest rates. Provide all income documents when applying, which can help portray a high repayment capacity, thus reducing the risk involved and improving the chances of securing reduced rates.