When you are buying a home, the whole process can look like a complex mathematical calculation. This is because most people are not aware of the right process and the steps involved in getting a home loan.
Lack of awareness makes them find themselves under a loan amount that seems too big for them to repay. Fortunately, there are ways in which you can reduce your home loan amount and get the best home loan to buy your dream house.
The best home loan will depend on the bank, the types of home loans you are applying for, and their tenure.
Most people are only aware about the importance of getting pre-approved for mortgages. But only few know how to get the best interest rate.
In this article, we will focus on practices that you can adopt to get a home loan.
Compare Online And Get The Best Find
When we need to buy a new laptop which is just a couple of grand, we invest time in researching different online platforms. But for some reason, we are stuck with one or two platforms when it comes to getting a home loan.
It is important that you drive through different online platforms and compare different terms and conditions for home loans. There are a few things to keep in mind when comparing different interest rates. For instance, ensure that you are comparing two similar factors.
Work On Improving Your Credit Score
A good credit score is important to get the loan you are looking for. If you lack the necessary credit score, you won’t be able to get a home loan, even if you are well-established. This is because a poor credit score means you are bad with finances. Therefore, a lender will see it as a risk and will not lend money.
The best home loan interest is available for individuals with good credit scores. The interest rate for a home loan can be as low as 7.5% or as high as 9.5%, depending on your credit score only.
Pay More In Down Payment
If you are looking for a low-interest rate in a down payment, then you need to have less loan amount. Unfortunately, that means your down payment needs to be more.
While you might be tempted to put down the bare minimum asked, you will be losing more in the long run. That’s because lenders offer a lower interest rate to individuals who offer larger down payments.
So, if you really want to get a good deal on your home loan, start saving up now for a bigger down payment.
Consider Shorter Loan Term
The interest rate on your home loan will be decided on your tenure. If you’re taking the full 30 years as tenure to repay your home loan, your interest rate will be more. While longer loan tenure means low monthly installments, the interest rate is at the highest.
However, shorter tenure on your loan can help you get a lower interest to work with. The shorter the tenure, the lower the interest rate. This is because lenders consider shorter tenure as low risk.
So, if you are looking to get the best deal, a shorter loan tenure might be the way to go.
Finally, Increase Your EMI
One of the best ways to reduce your interest payments is by increasing your monthly installments. The more you pay every month, the faster you complete your loan tenure. The faster you complete your tenure, the less amount you have to pay extra in the form of interest.
Yes, you have started with a low monthly installment. However, if you change jobs and get a better salary, you can revise your monthly installments and increase them. Once the tenure is reduced, the overall interest amount also reduces.