Your home loan EMI amount depends on a variety of factors. Once you are assured of your home loan eligibility, you can then plan to arrange housing finance and fulfill your home-ownership aspirations. However, keep the following top five factors in mind that would affect your home loan EMI:
Interest rate fluctuations are one of the most influential factors that affect housing loan EMIs. With a floating interest rate, there could be either a positive or negative effect on your home loan EMI. If you have a flexible income, you will find a floating rate of interest more convenient. Besides, it can be a rewarding option when bank rates go down. Home loan interest rate is dynamic because of the changes made in the interest rates by RBI and also due to changes in the international market.
The tenure period of the loan determines the exact amount of the EMI. Even the slightest change in the tenure can affect the equated monthly installment (EMI). Although the amount of EMI decreases with a longer loan tenure, the overall interest burden increases, making the loan more expensive. However, you can choose either a low EMI or low overall borrowing cost by adjusting your loan tenure.
Prepayment of the loan also affects the EMI value. Many companies charge a penalty for foreclosure or prepayment. Nevertheless, it reduces the outstanding balance, which in turn lowers the interest and EMI. If you have surplus funds and you find out that the interest on the home loan is higher than the return on your preferred investment, prepayment is the better option. However, before opting for a home loan, it is better to find out the prepayment charges and other terms and conditions.
For a particular value of the flat or home, you will be paying a certain amount as a down payment. The more you pay as down payment, the lower would be your loan requirement and consequently lower would be the EMI as well. There are norms like paying 20% of the value as down payment, but if you manage to pay a higher amount upfront, your monthly burden will be lesser.
Change of Lender
If you shift your loan to a different lender, you may land up with a more favorable EMI amount. This is because the interest rates differ between lenders and a home loan borrower has the option of looking for the most beneficial home loan product. There would be a defined paperwork process for shifting as well as charges involved. By shifting the loan, the outstanding balance of the loan transfers to the new lender and the new EMI arrangement begins.
Tata Capital is one of the best housing loan providers that offer attractive home loan interest rates, easy repayment terms, a wide range of home loans and tenure options – giving you a seamless home buying experience. Reach out to them today for a home loan.