How To Approach Your Next Move When Your Home Loan Interest Rates Bottom Out
With demonetisation coming into play and the real estate industry decreasing property costs, even home loan interest rates have seen a reduction. Although experts predicted a further fall in interest rates, this has not happened, and with rise in inflation fuelled by a steady increase in oil prices since last year, it is prudent to understand that home loan interest rates are lower than ever before, but have bottomed out for now and will not be reducing further. In such as scenario, home loan borrowers like you have two ways to think about the next steps.
How home loan borrowers can take advantage of interest rates bottoming out
Here are two ways in which you can make the most of low home loan interest rates and reduce your EMIs:
- Make part-prepayments to reduce your EMIs: If you are happy with the current home loan interest rate, you can continue with your existing lender, but use the low rates to make part-prepayments on your home loan in order to make your home loan more affordable.
- Go for a home loan balance transfer: If you are unhappy with the current interest rate by your existing lender, this is the time to opt for a home loan balance transfer with a new lender who offers you a lower interest.
Let’s study both these options in more detail:
Opting to make a part-prepayment: If your home loan is now at a floating interest rate, you know that this is the lowest interest you will be paying and your interest may increase in the future. In this a case, you can act now and prepay your loan, in turn reducing your EMIs. By opting to make a prepayment, you are utilising excess funds to pay an amount that exceeds your EMIs. Most lenders ask for prepayment to be more than 3 EMIs. By doing this, you are, in essence, reducing your home loan principal. And this means that your EMI will automatically reduce. In the event that the interest rates increase, you will still find yourself in a strong financial position as your principal has already reduced.
Opting for a home loan balance transfer: First, start by checking the interest rates on home loans offered by lenders across the board. You are sure to find cheaper interest rates and when you do, do more research and see if the lender is reliable, has no hidden charges, offers you flexible tenor and has low fees and charges. You can also check to see if your new lender can offer you other benefits like a top up loan when you do a transfer at low interest costs, which you may use for your home or for other personal reasons. An interest rate that is lower than even 1% can make a huge difference to your EMIs, but make sure that you also take into account all the charges for doing a balance transfer and see that you are saving money in spite of spending money on the process. The second thing you do when you are thinking about a home loan transfer is to check if your new lender’s rates are linked to the MCLR (Marginal Cost based Lending Rate) system. This means that your interest will be related to rate cuts by RBI and thus will be more responsive to the market, helping you avail the benefits of lowered rate sooner.
As a home loan borrower, it is very important for you to keep watch over the market rates and make the right move at the right time. Going for a home loan balance transfer right now is financially prudent and may help you save big on repayment. Getting a Home Loan Balance Transfer from Bajaj Finserv may prove to be very beneficial for you with low interest rates, easily online application, fast approval and additional loan facilities via a top up loan.