Home loan payments can stress your monthly budget if you don’t have a plan. Fortunately, you don’t have to spend the next 30 years of your life repaying an expensive mortgage. Use these tips to reduce your home loan costs.
Go for A Shorter Tenure
Your loan tenure is the primary factor responsible for the interest you’re supposed to pay. Though longer tenures cut down the monthly payment, shorter tenures will reduce the overall interest payable. So, before applying for a loan, choose a tenure carefully so that you don’t end up paying higher interest against your loan. Use a loan calculator to see how interest is drastically reduced for loans with shorter tenures.
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Prepayments Are a Good Option
The easiest way to pay off your loan quickly is by making regular prepayments. The next time you receive a bonus from your employer or an income tax refund, consider putting the extra money toward your home loan. Just make sure your lender doesn’t charge a penalty for prepayments.
Compare Interest Rates Online
It’s essential to do your research on different loan services and compare rates before choosing a particular lender. Several third-party sites can give you a better picture of lenders’ rates and charges levied. Compare home loan interest rates of different banks and credit unions before making a final decision.
Use a Refinance as An Alternative Approach
Loan refinancing is a good option for homeowners who are stuck in loans with unfavorable terms. With refinancing, if the interest rate charged by your lender is high, you can transfer the remaining debt to another union or bank at a lower interest rate.
Pay More as A Down Payment
Most banks pay 75% to 90% of the total value of the property. You’re required to contribute 10% to 25% of the remaining cost – this is called the down payment. While most home buyers try to pay as little down payment as they can, it’s actually wise to pay more out of pocket. The higher your down payment, the lower your loan amount, and the less money you have to pay back.
