Home loans become necessary if you want to own a house. Not everyone has the required savings at their disposal to pay for the house property that they want to buy. In these cases, home loans provide the deficit funds to supplement your savings so that you can buy your own home. Home loans are, therefore, popular among individuals as everyone dreams of having their own homes.
Home loans have two types of interest rates – fixed and floating. Fixed interest rates do not change over the loan repayment tenure while floating rates change if the lender changes its lending rates. So, if you are an existing home loan borrower and you have borrowed on floating interest rates, you can enjoy a reduction in the loan interest rates when the lender reduces its rates.
Currently, home loan interest rates are being cut down by leading lenders. This has caused a reduction in interest rates of the home loan market on the whole. Are you being able to avail of these interest rate cuts which are happening?
If you have a floating rate home loan, your lender will give you the benefit of interest rate cuts in the home loan market. As the lender would cut down on its interest rate to stay competitive in the loan market, the interest rate on your home loan would also come down and you can enjoy a saving on your interest payments. However, if you have a fixed interest home loan, here are two ways in which you can maximise on the benefits of interest rate cuts –
• Convert your fixed interest home loan to floating interest home loan
Many lenders allow borrowers to convert their fixed interest home loans to floating interest home loans and vice-versa. So, if you have a fixed interest home loan and rate cuts are happening in the market, switch to floating interest rate cuts. You would be required to pay a conversion fee and your home loan interest calculation would change. You would, then, be charged interest on the lender’s current floating rate and if there is any rate cut in the future, your home loan interest rate will go down.
• Transfer your home loan to another lender
If your lender does not allow the switching facility, or, if, after switching, the home loan interest rate charged by the lender is still high, you can opt for a balance transfer facility. The balance transfer of home loan is when you transfer an existing home loan from one lender to the other. If the other lender is offering you a lower interest on the loan, you can quickly get your loan transferred. You would have to pay a processing fee charged by the new lender and the loan would be transferred. Moreover, if you have a floating rate home loan and your lender is charging a higher interest than the other lender, you can transfer your home loan to enjoy lower rates.
Home loan interest rates are quite low in the current market. You should, therefore, make sure to make the most of such low-interest rates so that the additional cost of the loan is minimized.