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Taking a Home Loan? 5 Strategies to Lower Borrowing Costs and Save Money
Posted on Monday, February 24th, 2025 | By IndusInd Bank
Summary: Navigating the growing home loan market requires smart strategies to minimise costs. You can efficiently manage your home loan by choosing a shorter tenure, making a larger down payment, and opting for a joint loan with your spouse.
The Indian home loan market is currently valued at around USD 300 billion and is expected to grow at a CAGR of 22.5% over the next five years.
Acquiring a home is a significant milestone, and since real estate values keep rising, securing a substantial home loan has become a necessity. Although home loans enable the purchase of a property, managing borrowing costs can be difficult due to interest rates and other fees. Here are five practical methods of lowering borrowing costs and saving money on your home loan.
1. Choose a Shorter Loan Term
A longer loan tenure reduces your monthly instalments but increases the total interest paid over time. Conversely, a shorter tenure entails higher monthly payments but lower interest paid over time. If you can afford higher payments, choose a shorter tenure to save money over time. This reduces the overall cost of the loan and the total amount you pay.
2. Compare Interest Rates
Home loan interest rates can vary greatly, so it is crucial to compare rates to find the best deal. When comparing loan offers, consider both fixed and floating interest rates. While fixed rates provide stable, consistent payments, floating rates can lower your payments if interest rates drop, potentially saving you money. Select the one that best aligns with your financial needs and current market conditions.
3. Make a Larger Down Payment
The down payment is the amount you pay up front when purchasing a home; the remaining amount is financed with a loan. Making a higher down payment decreases the amount of money you need to borrow. Your monthly payments are reduced and become more manageable. Furthermore, a higher down payment lowers your risk as a borrower, which could lead to more favourable loan terms.
4. Make Partial Prepayments
During the initial phase of your loan, the majority of your instalments are used to pay interest and only a small amount of the principal is repaid. Making partial prepayments reduces the principal, which further lowers interest costs. This can also lower the overall cost of the loan and will shorten your loan duration.
5. Consider a Joint Loan with Your Spouse
Under Section 24(b) of the Income Tax Act, the government offers tax benefits for home loans, which allows you to claim up to INR 2 lakhs in interest deductions. Opening a joint home loan account with your spouse allows you both to claim an INR 2 lakh deduction separately.
6. Simplify Your Journey to Home Loan with IndusInd Bank
IndusInd Bank offers a range of home loan solutions designed to accommodate various needs, such as balance transfers, plot plus construction loans, top-up loans, pre-approved project home loans, home loans for NRIs, and home renovation/extension loans.
Some of the key features and benefits of choosing an IndusInd Bank Home oan are:
- Quick loan approval
- No hidden fees – transparent process
- Easy loan application process with convenient doorstep assistance
- Attractive interest rates
- Flexible repayment tenure available for longer tenure upto 30 years
- Dedicated customer support for all banking and loan queries
- Facility to pay off loan (offered at a floating interest rate) earlier without prepayment penalties
- Access to customised loan solutions for NRI customers
Get closer to your dream home by applying for an IndusInd Bank home loan online today.
Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.
