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Simple Ways to Reduce Your Home Loan EMI

Updated: Aug 28, 2022
Simple Ways to Reduce Your Home Loan EMI

Owning your dream home gives one immense joy and happiness. Most Indian families today depend on third-party financing, such as a home loan, to realise this aspiration.

However, a home is a massive financial undertaking and comes with a monthly outflow for anywhere between 10 to 30 years, depending on what repayment period you have agreed upon with your lender.

You may also want to look into ways to reduce home loan EMIs if your monthly obligation is quite large to begin with.

6 Effective Ways to Reduce Home Loan EMI

Wondering how to reduce home loan EMI? Here are the 6 most effective ways that can help you achieve this goal.

1. Make Frequent Part Payments on your Home Loan:

Generally, home loans are accompanied by lengthy repayment tenures that can range from 10 to 30 years wherein you have to repay the loan via EMIs for a very long time.

Failing to do so can impact your credit profile adversely, and getting a loan in the future can become difficult. Default could even cause the lender to repossess the pledged property.

While you can opt for the shortest repayment period to get out of the loan as fast as possible, you can also pay more than your monthly EMI at certain times of the year to reduce your overall installment burden in the future. This is a highly recommended option if you come across extra income such as bonus or incentives from work (for salaried borrowers) or a good festive season (for self-employed borrowers). Use our part prepayment calculator to understand how making part prepayments contributes towards reducing your overall tenure and interest outgo.

2. Choose a Bigger Down-payment Amount:

As per the guidelines set by RBI, lenders cannot approve the total amount required to purchase the property. Only a specific percentage of the market value of the home will be granted as a home loan. The rest of the amount has to be paid by the borrower directly to the property developer. Generally, this varies between 10% to 20%.

If you are eligible to receive up to 90% of the home loan amount, you can opt for a bigger down-payment amount greater than what is required as a way to reduce your monthly EMI going forward.

3. Balance Transfer of the Home Loan to Another Lender:

When you get your home loan approved by your current lender, it is possible that the interest rates were high. The good news is that you can find a better interest rate with l reputed lenders in the market like SMFG Grihashakti that offer home loans at attractive interest rates.

You can always avail the option of transferring the balance of your home loan to a new lending partner at a much more affordable rate of interest. This can considerably help lower your EMI burden on your home loan.

4. Opt for a Floating Rate of Interest:

If you are thinking of choosing the fixed rate of interest, then you must be prepared to shell out an extra 1% to 2% on your monthly installments. However, if you go with a floating rate of interest from day one then it may prove to be more economical in the long run.

5. Choose a Longer Repayment Period:

If your goal is to keep your home loan instalments on the lower side, then it is best to opt for a longer repayment tenure. Most lending partners allow you to choose a period between 10, 15, 20, 25, and 30 years. You can use a home loan EMI calculator to select a tenure so that the resulting EMI doesn’t strain your budget.

You can go for the maximum period as that will ensure that your monthly instalments become more affordable and easy on your pocket.

6. Consider a Step Down EMI Plan:

While this may be a contradictory method to reduce your home loan EMI, it can be effective nonetheless. This is because you initially start paying a higher monthly installment amount to the lender and gradually decrease it as you near the end of your repayment term.

This works well for those who may be nearing retirement and may wish to not carry forward the higher EMI burden of a home loan in the second innings of their lives. Do check with your lender if this option is available to you as per their policy.

The Bottom Line

When it is a question of how to reduce the loan amount and monthly EMIs, you must not leave any stone unturned.

Speak to a home loan expert from SMFG Grihashakti and get all insights on how to reduce home loan EMI, today.

Must Read: Tips to Reduce Your Home loan Interest Rate

Disclaimer: *Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG Grihashakti. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG Grihashakti’s policy at the time of loan application. If you wish to know more about our products and services, please contact us.

SMFG India Home Finance Co. Ltd. (Formerly Fullerton India Home Finance Co. Ltd.)
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