For instance, if one avails Rs.25 lakh at a 10% interest rate for 20 years, total interest payable will be Rs.32,90,130 while EMI Rs.24,126. A hike of 0.5% will compel borrowers to pay an EMI of Rs.24,959.
This rise in expenditure can be managed in certain ways.
Ways to deal with the hike in housing loan interest hike
A potential borrower or existing home loan borrower can check these ways to receive a comfortable interest rate.
Go for a higher down payment
A home loan applicant can opt for a higher down payment to reduce home loan EMI burden. This process reduces liability from a lender’s end and encourages levying a lower interest rate. Moreover, down payment will reduce the outstanding balance, which automatically makes the financial situation viable.
Opt for a short repayment tenure
Choosing a shorter home loan tenure during application helps to bring down the EMI and housing loan rates. For instance, a Rs.25 lakh loan with a tenure of 10 years brought down to 7 years will simultaneously reduce the interest payable amount. However, keep in mind that doing so would also increase your EMIs.
Choose part prepayment
A borrower can use their extra savings to make part-prepayments for the existing home loan. This would help in reducing the loan obligation and simultaneously lowering the EMI.
Also, if an applicants' income increases, one can use the funds to increase the EMIs, resulting in faster repayment, thereby lowering the interest payable.
Transfer home loan balance
Refinancing is an excellent option to reduce one’s burden of monthly repayment. A borrower can opt to transfer the home loan balance to a better lending institution. However, one must consider one must opt for this facility when the tenure is longer like 10-13 years or else the transferring charges may become expensive than the savings made by refinancing.
Taking one or more of these steps should help borrowers reduce additional strain from interest rate hikes.
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