A home loan is without a doubt the biggest monetary commitment that borrowers will ever make in their lifetime, isnt it? This is due to the high interest cost in totality and the lengthy repayment terms stretching from 15 to 25-30 years, which more or less consumes most part of worklife years .
And even the EMIs have a sizable impact on the overall amount that must be spent each month as per one’s income and budget. Because of this, people who have to take out a housing loan are always looking for ways to lower their overall debt.
So here are some tips for efficiently managing housing loan repayment and reducing interest costs.
Decide to transfer your balance
This option allows you to switch your entire mortgage balance to a different lender who provides better terms and a lower interest rate. You may select this option if your current lender rejects your request to change the SBI Home Loan for women‘s conditions or lower the interest rate.
Existing HFC and NBFC borrowers have the option to switch their loans to banks and benefit from UCO Bank MCLR-based rates by selecting this option.
After the RBI ordered banks to give new home loans (of floating rate) by linking them to an external benchmark, current home loan borrowers have the choice to switch from the old base rate or MCLR rate to these regimes. To find out more, it is best to speak with your current mortgage lender about your eligibility for a mortgage. Don’t forget to inquire about any associated fees in addition to the switching process and option.
Lower the interest rate on your SBI Home Loan for women (for NBFCs and HFCs)
NBFCs and HFCs base their lending decisions on PLR rather than the UCO Bank MCLR system run by the RBI (Prime lending rate). However, the current borrowers of these can reduce their interest payout by resetting the rate on their home loan by paying a conversion fee, which is a small percentage of the outstanding loan balances. It varies among various banks and lenders. Choose this option only if your savings from refinancing your mortgage are significantly greater than your savings from choosing this option after taking conversion-related fees into account.
Prepay your SBI Home Loan for women in full or in part
When borrowers have extra money on hand due to bonuses, the maturity of an investment plan, etc., they have the option of prepaying all or a portion of their outstanding home loan balance. Although lenders are prohibited by RBI regulations from doing so in cases of floating interest rates, they are permitted to do so by adding a specific percentage in cases of fixed home loan rates. Before prepaying, make sure the prepayment fees are not excessive.
Make sure the prepayment decision won’t affect your emergency fund, long-term financial goals, or ability to obtain a mortgage. If the returns on your current investments don’t correspond to any particular goals, like fixed deposits, you can redeem them to pay off your mortgage sooner. Additionally, refrain from using contributions set aside for specific long-term goals to make early payments of SBI Home Loan for women.
If you’re currently using the old base rate, switch to UCO Bank MCLR. In response to numerous complaints from borrowers and allegations that banks and other lenders were ignoring existing borrowers while lowering interest rates, the Reserve Bank of India (RBI) introduced the concept of MCLR (Marginal Cost Based Lending Rate)-based lending rates as of April 1, 2016. Borrowers of loans disbursed up until March 31, 2016, have the option of staying with the base rate or switching to MCLR with a small switching fee, if applicable. This is true even though all newly issued bank loans are based on MCLR rates.
It more transparently and accurately reflects changes in policy rates than the base rate and BPLR system because the repo rate is also taken into account. Contrary to other rate structures, MCLR enables borrowers to take advantage of RBI rate cuts. Therefore, switching your home loan to MCLR is a good option if the final interest rate offered is lower and the other transfer costs do not outweigh the benefits you receive from switching to UCO Bank MCLR.
Make use of the tax benefits available
Borrowers receive some relief because of the Income Tax Act’s dual tax benefits on a home loan’s principal and interest components. Under Section 24 and Section 80C, borrowers may deduct up to Rs. 2 lakh in interest payments and up to Rs. 1.5 lakh in the principal of a home loan. This deduction is only valid though after the entire house has been constructed.
If the borrower sells the house before the five-year window from the day they took possession expires, Section 80C won’t allow any tax benefits or deductions.
In the case of joint home loans where the co-borrower is also a co-owner of the property, the total claim cannot be greater than the total principal repaid during the year. In these situations, each party may deduct interest and principal payments made throughout the year separately based on their respective ownership interests in the property.
Increase your EMIs if possible
Many borrowers opt for longer loan terms to shorten the length of their monthly payments, even though their EMIs can be paid off within the parameters of their home loan eligibility for a shorter period of time. In the case of loans, however, this has the opposite result of what it is intended to do, as longer SBI Home Loan for women tenures result in higher interest payments. The maximum percentage of your monthly income that should go towards your loan is 40%.
However, you should try to pay higher EMIs in accordance with your home loan eligibility in addition to the standard EMI amount whenever possible so that your interest payment will be decreased as a result of the additional amount paid, resulting in a decrease in the amount of outstanding principal. If you increase your EMI payment by a specific percentage each year, your loan will be repaid faster and with less interest cost too.
