Tips to Reduce Your Home Loan EMI

If you have already taken a home loan, you must have your EMIs debited every month. If you don’t have an existing loan and are planning to apply for a housing loan, it is important to know that you will be liable to make monthly EMI payments until your loan is completely repaid. For many people, EMIS take up a majority of their monthly budget. In this article, we will have a look at how you can reduce your home loan EMI in the most efficient manner.

Tips To Reduce Home Loan EMI

There are many ways in which you can reduce the EMI of your housing loan. Here are 6 effective ways to reduce your monthly home loan EMI.

1. Transfer Your Loan To a New Lender

   There are several banks and lending institutions that offer home loans. These different lenders offer different benefits, home loan interest rates, tenure, fees, and others. So, if you have an existing home loan with a lender who charges a very high interest rate, you can transfer your home loan to a different lender that offers a lesser interest rate. Reduce home loan interest rate to pay lesser monthly EMI. Most home loans are offered on a floating interest rate basis and have no penalty on transferring your loan. So, the only cost that you will have to bear is the fee that is charged by the new lender.

2. Change From Fixed To Floating Rate

   If you had opted for a housing loan with a fixed interest rate, it is more likely that you are paying a higher home loan EMI than required. So, opt for a floating interest rate as lenders usually charge about 1% to 2% higher with fixed interest rate home loans.

3. Extend Your Tenure

   If you are not in a financially sound position to pay high EMIs, you can opt for an extension of your tenure. This can help you stretch out your payments over a longer period of time. It can also help lift the pressure of paying higher EMI and provide you with some relief. For example, if you have to repay ₹40 Lakhs at an interest rate of 7.5% over a period of 10 years, then your EMI would be higher when compared to a tenure of 20 years. With a tenure of 10 years, you would have to pay ₹47,481. Whereas, with a tenure of 20 years, you would only have to pay ₹32,224 on a monthly basis, which is ₹15,257 lesser than the EMI you have to pay on a 10-year tenure.

4. Make Use of Loan Restructuring

   The Reserve Bank of India (RBI) provides the option to restructure loans. This initiative was introduced during the time of the pandemic. Many people were in no financial position to pay their EMIs. In response, the RBI allowed borrowers to opt for a moratorium with which you can waive your home loan EMI for a certain period of time and restructure the loan accordingly to a suitable repayment schedule later.

5. Switch to External Benchmarks

   The Reserve Bank of India introduced external benchmarking to bring in a more transparent and standardized methodology. All banks are mandated to adopt external benchmarking when it comes to retail loans and MSME loans. However, banks also have the option to extend the method of benchmarking to other loans such as home loans. Switching to a bank that follows external benchmarking for home loan can help you avail of a floating interest rate and save on your financial expenditure.

In Conclusion

While availing a home loan, it is important to be consistent with your home loan EMI repayments. If your EMI payments are high, there are plenty of ways to reduce your home loan EMI. It is wise to research prior to choosing a home loan so that you can pick one that offers the best home loan interest rates so that your EMI payments stay affordable. If you are looking to apply for a home loan, Piramal Capital and Housing Finance can help you plan your home loan.