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21-Aug-2023 | Home Loan
Purchasing a home is a significant milestone in one's life, and for most of us, it requires securing a home loan to finance this dream. While a home loan helps us achieve our homeownership goals, it's also a long-term financial commitment. However, there are several smart strategies you can adopt to save money on your home loan.
The first step in saving money on your home loan begins before you even apply for one. Thoroughly researching and comparing different loan options from various lenders is crucial. Look beyond just interest rates; consider factors like loan terms, additional charges, and repayment options.
Your credit score plays a significant role in determining the interest rate you'll be offered on your home loan. A higher credit score typically leads to competitive interest rates, which can save you a substantial amount over the life of the loan. To improve your credit score, focus on paying your bills on time, reducing credit card balances, and avoiding taking on too much new debt. You can even check free credit score online and take significant steps to improve your credit score.
While it might be tempting to put down the minimum required down payment, making a larger down payment can significantly impact your loan's overall cost. A larger down payment reduces the principal amount you need to borrow, which in turn lowers the interest you'll pay over the life of the loan.
Opting for a shorter loan term, such as a 15-year mortgage instead of a 30-year mortgage, can save you a substantial amount of money in interest. While monthly payments may be higher and you'll pay off the loan much faster. You can calculate how much EMI you need to pay using the home loan EMI calculator.
Even making small additional payments towards your Loan can have a significant impact over time. These extra payments can shorten the loan term and reduce the total interest paid.
Depending on your home loan type, there might be tax benefits associated with homeownership and mortgage interest payments. Research these benefits and ensure you're taking advantage of them to reduce your overall financial burden. There are various articles and blogs on home loan tax benefits, you can read them for more clarity.
Lenders assess your financial stability when determining your interest rate. Consistently maintaining a stable income, paying bills on time, and managing your debt responsibly can contribute to a healthier financial profile, which lenders view favourably.
Late payment fees can add up, and a history of late payments could negatively affect your credit score. Set up automatic payments or reminders to ensure you never miss a payment deadline.
In conclusion, a home loan doesn't have to be a financial burden if you follow a planned and strategic approach. By researching your options, managing your credit score, making smart payment decisions, and exploring different repayment strategies, you can save a significant amount of money over the life of your loan.
