The rise in property prices has impacted the fixed and floating rate of interest to a certain degree. As home loan interest rates rise, the housing loan eligibility rules also become tough. Today, when home loan interest rates are high everywhere, banks have the ability to increase tenure up to a certain point. Every EMI has two components, principal repayment and Interest. Minor changes in EMI can bring about really huge changes to the total amount you pay the bank

Reduce Your Home Loan Burden

With the increase of interest on savings account and hike in repo rates by the RBI, the banks are now left with no alternative but to raise the interest rates on all the loan products. Many prominent players have already increased the interest rates. Due to the current rate hike, the worst affected are the home loan borrowers who are servicing the loan under floating interest rate as the lenders have the power to increase the rates of interest on the basis of its base rate for their floating rates. Home Loan borrowers are now trying to reduce the EMI burden of their respective home loan. Following are some useful tips to reduce your Home Loan EMI burden.

* Switching home loan: Compare the benefit you get by retaining and what you get in switching to new bank. If you get more benefit from switching home loan, best utilize the opportunity. When switching home loan, existing lender charge penalty on pre-closure and new lender will charge some processing fee. Compare the benefit and switch home loan to cheaper loans and save good amount in a month.

* Negotiate with your bank: Before switching Home Loan negotiate for a lower rate with your current lender or bank. They may have a better plan for their existing customers and banks are keen to retain existing customers. It is quick, and involves fewer formalities for reducing your home loan burden.

* Pay Higher EMI: With the hike in repo rates by the RBI, many prominent players are now left with no alternative but to raise the interest rates on all the loan products. If switching home loan or negotiate for a lower rate is not a big deal, you can opt for paying higher EMI. You can opt to pay more. But, this option is suits you only if your income permits the extra outflow.

* Increase home loan tenure: Another option is increasing the home loan tenure. The bank keeps your EMI same but increasing the number of EMI which you will have to pay by extending your loan tenure. Banks will be willing to offer this option based on the age of retirement and the bank will not exercise this option if you are nearing the retirement age of 60.

* Partial prepayment: For a financial institution, a prepayment results in the loss of interest income and therefore prepayment charges are sometimes applicable. Usually, on prepayment, the EMI is kept constant but the term of the loan is reduced to reflect the reduced principal. You can opt for partial pre-paying home loan. Most banks do not charge prepayment penalties for partial prepayments. By keeping the EMI constant and reducing the tenure on prepayment, you will save a larger amount than by keeping the tenure constant and reducing the EMI.

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