Home buyers can now take a sigh of relief as the Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 6.5% in its monetary policy committee meeting today. This is going to take some stress of prospective home buyers who were cautious and were delaying their buying decisions due to the rising interest rates.

Though some banks have already increased their lending rates, including HDFC and SBI, and others are likely to follow suit, but this RBI decision to keep the repo rate unchanged certainly brings a breather for loan borrowers, especially home buyers.

Adhil Shetty, CEO, Bankbazaar.com, says, “By holding the repo rate steady, the RBI is orchestrating an alignment of economic aspirations with on-ground realities. RBI’s decision will send a positive message and is likely to support growth across industries. A steady repo rate implies stability in the interest rates offered by banks. Home buyers who have taken loans or are planning to take loans for purchasing property can benefit from the unchanged repo rate as it may lead to consistent or slightly lower borrowing costs.”

Homebuyers would be much relieved by this decision because the market has been steady following a period of instability. There is a growing demand for real estate, and buyers want to buy properties at affordable prices.

Shetty suggests, “Borrowers need to apply a cautious approach, prepay their high interest debts, borrow responsibly and pay their bills on time to avoid incurring any additional cost to their existing financial liabilities.”

Also Read: How to manage your credit card expenses and lower your Credit Utilisation Ratio

What can Home Loan Borrowers do now?

Home loan borrowers have several strategies at their disposal to reduce their interest costs on home loans. Implementing these strategies can lead to significant savings over the life of the loan. Here are some effective ways to achieve this:

* Maintain a High Credit Score

A strong credit score can help you negotiate lower interest rates with lenders. Pay your bills on time, manage your credit responsibly, and keep your credit utilisation ratio low to maintain a healthy credit score.

* Compare Interest Rates

If you are a prospective home buyer and planning to take a loan, you must research and compare interest rates offered by different banks and financial institutions. Even a small difference in interest rates can lead to substantial savings over the loan tenure.

* Negotiate with Lenders

Don’t hesitate to negotiate with lenders for better terms. If you have a good credit history and a stable income, you may be able to secure a lower interest rate or reduced processing fees.

* Opt for Shorter Loan Tenure

While a longer loan tenure may result in lower monthly payments, it also increases the total interest paid overtime. Choosing a shorter loan tenure can help you save on interest costs.

* Make a Higher Down Payment

Putting down a larger down payment reduces the principal amount of the loan, which in turn lowers the total interest paid. Aim to make a substantial down payment if your financial situation allows.

* Make Prepayments

Whenever you have extra funds, consider making prepayments towards the principal amount. This reduces the outstanding balance, leading to lower interest costs over the loan tenure.

* Opt for Part-Payment Option

Some lenders offer a part-payment option where you can make occasional lump-sum payments towards the principal. This can help reduce your overall interest burden. Paying just 5% over and above your regular repayments of your loan every month can do wonders to reduce your overall interest liabilities.

* Refinance Your Loan

If interest rates have increased since you initially took out your loan, consider refinancing. Refinancing involves replacing your existing loan with a new one at a lower interest rate. Be sure to factor in any associated costs before deciding. Evaluate the option before accepting it.

* Regularly Review Finances

Periodically assess your financial situation and the performance of your loan. As your income increases, consider increasing your EMI payments to shorten the loan tenure and reduce interest costs.

By combining these strategies and being diligent in managing your home loan, you can effectively reduce your interest costs and achieve financial stability.