Top 5 Tips to Bring Down Your Home Loan EMI

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09 JUNE, 2021

A home loan EMI or Equated Monthly Instalment is a systematic way of repaying the loan amount. It includes the repayment of the principal amount as well as the interest component. If your home loan EMI eats up a major portion of your monthly income, it can be financially burdensome in the long run. Moreover, keeping up with regular EMI payments can be challenging, and this can increase the risk of default. To avoid this, you can consider reducing your home loan EMI. Mentioned below are some tips and tricks that can help you decrease the home loan EMI, thus making loan repayment easier.

Increase your loan tenure
The longer your home loan tenure, the lower will be your EMI. This is because the repayment amount gets distributed over the tenure of the loan. You can use a home loan EMI calculator to get an estimate of your EMIs for different loan terms. Opt for a loan term that makes your EMIs affordable. By doing so, you will be able to service your home loan without straining your finances.
Prepay your home loan
Whenever you get access to surplus funds, you must utilise them for making part-prepayment of your home loan. This will reduce the outstanding loan amount, and consequently bring down your home loan EMI. Do not forget to make a note of prepayment charges before prepaying your home loan. As per the home loan prepayment rules, the prepayment charges or penalties cannot be levied on borrowers for taking a floating rate home loan. No extra charge can be levied on either part or full prepayment of the loan. However, if you have opted for a fixed rate home loan, the lender can levy a foreclosure charge for prepayment of home loan
Home loan balance transfer
A home loan balance transfer is a facility that allows borrowers to transfer their outstanding home loan from their existing lender to a new lender. You can make use of the balance transfer facility and settle for a lender that offers a lower interest rate and favourable loan terms. Since the home loan interest rate will decrease, your monthly instalment will also reduce.
Negotiate the service terms with your lender
If you have paid the home loan EMIs regularly and maintained a good relationship with your existing lender, you can consider negotiating the service terms of the home loan. By doing so, you may be able to procure a lower interest rate on your home loan amount. This, in turn, can reduce your home loan EMIs.
Make a higher down-payment
While availing a home loan, it is possible to avail up to 80%-90% of the property’s value as the loan amount. You would be required to pay the remaining 10%-20% as a down payment while purchasing the property. However, you can consider making a higher down payment (30%-35%) when buying a property. This will reduce your home loan EMIs significantly.

It’s always advisable to speak to your lender if you are facing challenges in making regular EMI payments. Your lender may most likely ease your repayment burden by increasing the loan tenure. You should never default on your home loan under any circumstances. Since a home loan is a secured loan, the lender reserves the right to seize your property in case of a default.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

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