The easiest way of reducing your home loan tenor is by making regular prepayments towards your home loan. The fewer years you take to repay the loan, the lower will be your payment towards interest. However, reducing the tenor will increase your home loan EMIs. So, calculate how much you can afford to pay on a monthly basis by using a home loan EMI calculator and consider these 4 smart ways of reducing your home loan tenor.
Get a home loan on a floating interest rate to avail lower market rates
Home loan interest rates vary across lenders based on whether you choose floating or fixed interest rates. Borrowing a choose floating or fixed interest rates on a floating interest rate allows you to benefit from the rate changes of the market, which is also a pertinent way in which you can bring down the tenor for your existing loan.
For example, say you took a home loan of Rs. 90 lakh a few years back on the floating interest of 11% on a tenor of 20 years. All this while your EMI contributions towards the loan was Rs. 92,897. Now based on RBI guidelines for home loan and the nature of your loan, your lender decides to reduce your interest rate to bring it down to 10%. This means that your EMIs will reduce considerably for the rest of the tenor. But, instead of allowing this reduction in EMIs, you can ask your lender to bring down the tenor of your loan and keep your EMIs the same. Since you are financially accustomed to pay this EMI amount, a tenor reduction will actually help you pay less towards overall interest.
Additional Read: Your Guide to Home Loan Sanctioning and Disbursement Process
Compare loan offerings and carry out a balance transfer
Say you took a home loan a few years back from a lender on a fixed interest rate based on your immediate needs. However, this does not mean you cannot look for lucrative home loan offers with lenders in the future. Opting for a home loan balance transfer at a nominal interest not only allows you to bring down the tenor of your existing loan but also opens up an array of exciting offers.
You can consider switching your existing home loan on a competitive rate of interest and affordable terms by doing a Balance Transfer with Bajaj Finserv. This will give you a chance to bring down your tenor too. Above all, you will also get additional offers on your transfer such as a 3-EMI holiday, a top-up loan, and customized insurance policies.
Make regular part-prepayments to bring down your tenor
You can reduce your overall interest payment and thereby shorten your tenor by making regular part-prepayments towards your home loan. Lenders like Bajaj Finserv charge nothing extra when decide to make regular part-prepayments towards your home loan. Whenever you have some extra funds in hand, owing to a salary bonus or from matured investments, you can use the home loan prepayment calculator to check how making a prepayment can reduce your overall EMIs and tenor.
Readjust and increase your EMIs whenever you get a salary hike
Increasing your home loan EMIs will allow you to directly bring down the tenor of your loan. Lenders generally allow you to revisit your loan terms once every year, so you can use this to your advantage every time your salary is appraised and increased. Consider your income-debt ratio and in case you see that an increasing EMI will fit well within your new financial plan, talk to your lender. This way you can pay back your home loan at an increased EMI and cut down on your initial loan tenor.
Additional Read: Understanding Common Home Loan Terms to Make Better Decisions
Based on these suggestions you can easily bring down the tenor of your home loan and repay the loan more conveniently.
Bajaj Finserv brings you pre-approved offers for personal loans, home loans, business loans, and a host of other financial products. Not only does this simplify the process of availing financing, but also helps you save on time. All you have to do is share a few basic details and check out your pre-approved offer. Need instant financing? Think it. Done with Bajaj Finserv.
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