As a housing loan is mostly provided on floating rates, it can become a substantial burden in case the rates increase. However, borrowers can follow a few tips to reduce their rates and interest. To reduce the impact of rising home loan rate, follow this guide -

  • Prepay your loan
Prepayment options like part-prepayment or foreclosure can help you save on interest payment substantially. In effect, it also helps reduce one’s total repayment liability while easing finances via reduced EMI amount.

  • Apply for a tenor reduction
A reduction in tenor allows you to repay the entire loan liability within a shorter span than selected initially. Thus, you also end up paying lower interest as the number of EMIs is reduced.
It may increase each EMI, but effectively reduce the interest payable due to a reduced tenor for the amount lent.

  • Avail balance transfer facility
Opting to transfer the balance of your home loan to another financial institution offering lower home loan interest rate can help save significantly on payable interest. Plus, with specific lenders, you can also avail additional funds as top-up loans.

Lastly, a home loan availed for the construction or purchase of a house property also comes with tax benefits under various sections of the Income Tax Act 1961. Such deductions claimed can reduce the effect of increasing interest rate on home loans.

Like, Section 80C allows up to Rs.1.5 lakh as a deduction on the principal amount of home loan. Section 24(b) allows an annual deduction of interest paid on the home loan.

Keep these pointers in mind for effective management of your housing loan. Before filling a home loan application form, utilise an EMI calculator to estimate total interest payable and monthly installments.