How to reduce home loan emi

Home loan emi is the biggest concern in today’s Indian real estate buyers. Real estate have gone up multiple folds in last few years and buying a home in Indian cities especially for middle class have become extremely difficult. Middle class is the biggest consumer segment for not only real estate but also across industries for different kind of products in India.

So due to these extremely high prices most of the buyers depend upon home loan to fund to their real estate needs. Buying a home is more than just buying a apartment or flat in India. So often buying process is associated with long process of research and analysis of different projects and sites. But the road doesn’t end here, in fact it starts here.

Buying a house is not a big deal, managing your home loan emi is the biggest and toughest thing. The reason is quite simple that it is out of control for a buyer. Indian economy is a growing economy and there is lot of inflation. So interest rates are very instable and they change quite frequently. Home loan emi amount is calculated by bank based upon the home loan principal and interest rates.

Interest rate depends upon whether you have chosen floating rate or fixed rate. Base rate is fixed by reserve bank of india and then bank set the interest rates for floating and fixed rate home loan schemes. In floating rates home loan, interest rate will change if reserve bank of India changes its bases rates whereas in fixed rate, interest rates are fixed at least for a specified time.

Therefore bank will charge you slightly more than floating rates for fixed rate home loans. Though, initially concept was that interest rate will remain constant for entire tenure of home loan in fixed rate schemes but due to frequent changing interest rates, most of the bank offers fixed rate for specified period and then they will review it and may change interest rate if required. So for example, if you took a home for 20 years, bank will set a fixed rate for five years and then they will review it after five years. Then again they will specify a interest rate which remain constant for next five year and so on whereas in case of floating rates, it can change every quarter.

As we know floating rates schemes comes with lower interest rates than fixed rate home loan schemes but fixed rate loan could be better option if we are expecting interest rates to go up because then fixed rate emi will remain same whereas in floating rates, home loan emi amount will increase once base rates are increased by RBI. But if we expect interest rates to come down then going for floating rates will make more sense.
So choose accordingly.

Very usefull information, thanks..
Regards
JJInfra

Hello real_buzz, I am really very impressed by the way you have explained how to reduce home loan emi. This information is really very useful for me as I am looking forward to take a home loan for buying a new home. Thanks for sharing.

The banks are allowing the payments for the customers for the interest of the amounts. It schedule payments for the companies and home loans so it applicable of the bank finance for industrial emi. The paying balance reduce the time case of the customers and maturity amounts for loan.