Are you planning to purchase your first home with the aid of a housing loan? Check out this post for simple ways to help first-time home loan borrowers reduce their EMI amount.
Purchasing a home is a dream shared by millions across the country. However, a common deterrent in fulfilling this dream is the outrageous real estate prices. Taking a home loan is a go-to option for the majority of first-time home buyers. Home Loan is an easy alternative where an individual can buy their home now with a commitment of payment of a small portion of amounts over a regular period of time, i.e. EMIs. EMIs or Equated Monthly Instalments are the monthly obligations that a customer has to serve over a period of time
In the article, we will discuss the ways available for first-time home loan borrowers to reduce the EMI amount. There are numerous ways to reduce EMI and ensure steady repayment while also being able to take care of other monthly expenses. Here are some of the things you can do-
Under Pradhan Mantri Awas Yojana (PMAY), first-time homebuyers can avail of interest subsidy on their home loans. The subsidy is available for people from-
EWS or Economically Weaker Section: Households with cumulative income up to Rs. 3,00,00 per annum.
LIG or Lower Income Group: Households with cumulative income between Rs. 3,00,001 to Rs. 6,00,000 per annum.
MIG 1 or Middle Income Group I: Households with cumulative income between Rs. 6,00,001 to Rs. 12,00,000.
Apart from the income category, there are some other eligibility criteria that the borrower should fulfil to take advantage of the interest subsidy. All the borrowers eligible for the scheme will be provided home loans at a subsidized interest rate. As the home loan interest rate will fall, so will the monthly EMI amount.
But note that not every lender in the country is approved under the PMAY scheme. If you are a first-time homebuyer looking for a home loan, choose only a PMAY approved lender.
When you apply for a home loan, the lender will approve up to 70%-90% of the cost of the property. The borrower has to pay the remaining amount from their own funds
However, borrowers do have the option to make a bigger down payment. This will allow you to reduce the total amount you need to borrow from the lender.
As EMI is calculated based on the loan amount, interest rate, and loan tenure, reducing the loan amount by making a bigger down payment can help reduce the EMI. Lenders also offer a part-prepayment facility where borrowers can make additional payments towards the loan to reduce the balance amount and monthly EMIs. The good news is here is that majority of the home loans are free from pre-payment charges.
Home loans are generally offered for a tenure of 15 to25 years. As compared to a home loan of Rs. 50 lakhs taken for 15 years, the monthly EMIs would be lower for Rs. 50 lakhs taken for 20 years.
While this will increase the total interest outflow of the loan, it is still an effective way to reduce your monthly EMIs.
Once your financial condition upgrades, you can again reduce the tenure.
The loan tenure depends on the eligibility of the borrower. So, it is possible that your lender might not allow you to increase your home loan tenure. But if you have this facility, you can use it to reduce the EMI amount.
A high degree of wisdom is to be applied while choosing a lender. If you are still browsing through lender websites to apply for a home loan, ensure that you have thoroughly compared the top options before deciding. Focus on factors such as the reputation of the lender, interest rate, processing fee, tenure, and repayment flexibility to choose the best.
Financial institutions now offer home loans at highly competitive interest rates and with features such as paperless document processing and quick approvals to salaried and self-employed applicants. Look for a reputed financial institution for your home loan to ensure that your long-term association is satisfying and stress-free. If you are planning to buy a home, it is generally recommended that the home loan EMI amount is restricted to 30%-40% of your monthly income. If you are concerned about EMI payments, use the suggestions discussed in this post to reduce the amount so that you can pay your monthly EMIs while also effortlessly managing other personal and household expenses.