A home loan provides the financing you need to buy a property with ease, however, the most important factor that influences how affordable the loan is for you is the EMI. While you can forecast your EMIs using a loan calculator, India’s changing economic policy as well as other factors can affect your interest rate and create fluctuations in your EMIs. Your ability to take these fluctuations in stride or to reduce your EMIs can go a long way in ensuring that your repayment is stress-free.
Take a look at the various factors that can affect your EMIs below.
- Change in Home Loan Interest Rate
Fluctuations in home loan interest rates are one of the major factors that affect the Home Loan EMIs. This fluctuation is generally applicable to the floating interest rate as your current interest rates depend on prevailing market conditions. In case RBI increases or decreases the interest rate, your EMI will be affected. This impact on your home loan EMIscan either be positive or negative. However, if you think that floating interest rates are riskier than fixed interest rates, you may not be right. This is because when the rates cut down, a floating rate passes on the benefit to you. Additionally, even fixed rate loans have a reset period after which your lender can change the interest rate based on market conditions. You can calculate payable interest towards to your home loan by using EMI Calculator.
- Change in Home Loan Tenor
The tenor of your loan and your EMI are inversely proportional to each other. The longer your home loan tenor, the lower is your monthly installment and vice versa. However, you may forget to consider that longer tenor attracts higher interest as the loan amount is outstanding for a longer period. In case your income has increased, you can shorten your tenor and thus, you will end up paying higher EMIs as compared to earlier installments but save more on your total interest.
- Prepayment of Home Loan
Every lender gives you an option to prepay your home loan. This decreases your principal and that, in turn, reduces your interest payment and thus your subsequent EMIs. Lenders may charge you a small prepayment penalty when you make part-prepayments. However, there is no charge when you make such prepayments on a home loan with a floating interest.
Transfer Home Loan Balance to Another Lender
To save yourself from paying higher interest, as a borrower you have an option to get a new home loan by doing a balance transfer of your existing loan with a new lender offering lower interest rates. This will reduce your EMIs. However, before you opt for home loan transfer, make sure that your savings from such transfer are higher than the cost you will pay to carry out the transfer. Usually, a balance transfer is beneficial when you do it in the first half of your home loan repayment tenor.
Chose Step-up or Step-down Repayment
When you apply for a home loan, you have an option to choose your home loan repayment option based on your income. You can either opt for step-up home loan repayment in case you have just started with your career. In the first instance, your EMIs in the beginning as lower, and they increase in proportion to your income. In case you are close to attain the retirement age or expect a decline in your income, you can opt for step-down repayment. In this option, you have to pay higher EMIs initially and lower EMIs after a certain time. This repayment method will cause a change in your EMIs.
Now that you know the factors that can either increase or decrease your EMIs, you can be more cautious while choosing between various loan offerings. This way you can avail a substantial yet affordable home loan. While considering various loan deals in the market, take a look at the Home Loans offered by NBFCs. Here you can find funding up to Rs. 5 crore and can choose to repay the loan in up to 20 years.
Author Bio: Digvijay Singh Kanwar is a professional content writer and digital marketing expert and he loves to write about finance and tech-based articles. You can contact him on firstname.lastname@example.org