Reduce EMI Without Reducing Home Loan Tenor - Home Loan Blog - Tata Capital

How to Reduce Your EMIs Without Increasing the Home Loan Tenor?

Mar 08, 2017

Unlike many other loans, home loan is a good loan that helps you create an asset. An asset that you can use as well as which appreciates in value (generally).

But due to high costs of real estate these days, it is increasingly becoming difficult for people to purchase property without the help of housing loan. But honestly speaking, most people find the after-effect of taking a large loan, i.e. paying EMIs quite stressful. And indeed its tough to continue paying a large part of your income every month as EMI for years.

But if you are smart, its best to complete your loan as early as possible. It is because it reduces the total interest outgo during the course of the loan. But short tenor means higher EMIs.

So is there a way to reduce home loan EMIs without increasing the tenor?

Yes there is. If you are about to apply for a housing loan, then you can do it easily. If you already have a loan, then you too can do it by shifting your loan to a different lender.

The key to lower EMI is lower interest rate.

Lower your borrowing rates are, lower will be your monthly EMIs.

Let's see how.

Suppose you need to borrow a home loan of Rs 30 lac for 20 years. What is the impact on EMIs if you can make small changes in interest rates?

At 9.0%, the monthly EMI is Rs 26,992 (Total Interest - Rs 34.7 lacs)

At 9.5%, the monthly EMI is Rs 27,964 (Total Interest - Rs 37.1 lacs)

At 10.0%, the monthly EMI is Rs 28,951 (Total Interest - Rs 39.5 lacs)

At 10.5%, the monthly EMI is Rs 29,951 (Total Interest - Rs 41.9 lacs)

At 11.0%, the monthly EMI is Rs 30,966 (Total Interest - Rs 44.3 lacs)

As you can see, higher the rate of interest, higher will be the monthly EMI. Also, there is a high difference in total interest outgo during the 20-year loan tenor.

So what we are trying to say here is that when you are about to take a home loan, do check with various lenders about the rates being offered. It always saves you a lot of money if you can find a lender that offers you a loan at lowest possible rate.