Everyone wants to have a home that can be decorated with love and happiness. But due to rising inflation and rising costs, buying a home is becoming difficult. At the same time, people avoid taking home loans for fear of long-term EMI burden. But today we will tell you a solution with the help of which you can reduce the burden of EMI.
While taking a loan, keep in mind that the loan should be only 2 percent more than the transfer repo rate, this helps in repaying the loan easily. Because the reduction in spread will reduce the interest rate. The difference between the repo rate and the loan rate is called the spread rate.
For example, suppose you have taken a home loan at a rate of 9.5 percent, currently the repo rate is 6.5 percent. This way your spread red becomes 3 percent while the average spread rate in the market is 3 percent. If you get a loan around the average spread rate, the loan will be cheaper.
If the spread rate difference between the market rate and your loan rate is more than 0.5 percent and your loan is more than half due or you took the loan before October, you can talk to the bank about refinancing it.
You can also opt for pre-payment option to avoid EMI burden. By increasing the EMI by 10 percent annually, you can save up to 65 percent interest. This also does not require that you pay in one go. Increase the EMI according to your salary. In this way, your loan tenure is reduced and the interest is also reduced.
For example, if you take a loan for 20 years at an interest rate of 8.5 percent and increase the EMI by 10 percent annually, the loan will be cleared in just 79 months, i.e. less than 7 years. If in 20 years, suppose you are getting interest of Rs 100, that too will come down to Rs 35.
If the loan is for 20 years, you can reduce the loan tenure to 4 years by paying an additional EMI once a year. However, one thing to keep in mind is that some banks offer the option of paying a minimum prepayment of two or three EMIs.
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