Top 4 Factors That Can Affect Home Loan EMI - Home Loan Stories | Kotak Mahindra Bank

09 JUNE, 2021

Home loans enable you to fulfil your life goal of purchasing a house without draining your savings. You can pay the home loan in easy monthly instalments (EMI) by choosing a suitable loan tenure. But the EMI amount you need to pay each month is influenced by a number of factors that you should know about. Here are the top 4 factors that can influence your home loan EMIs.

  • Change in home loan tenure
    Most borrowers know that the longer the home loan tenure, the lower is the monthly home loan EMI. Any change in the loan tenure can affect the amount you repay towards the outstanding sum. So, if you opt for a lower tenure, your home loan EMI shall increase and vice versa. However, as a home loan borrower, you must remember that choosing a longer tenure leads to an increased rate of interest, which can affect your finances in the long term.

  • Prepayment of home loan
    Prepayment is when you make a lump sum payment towards the principal amount of your home loan. Making such a partial prepayment can affect your home loan EMI, as the balance amount changes. This in turn helps reduce the interest payable on the outstanding sum. When you make a prepayment, the lender may allow you to change the EMI or the tenure of the loan. In this case, if you choose to keep the tenure constant, your EMI will decrease and if you choose to keep the EMI constant, the tenure will decrease. 

  • Change in loan interest rate
    There are two types of interest rates - floating and fixed. While fixed rate of interest remains same throughout the tenure, the floating interest rates fluctuate basis the change in market rates. Any increase or decrease in the interest rate during the tenure affects your home loan EMI. With floating rates, your loan interest rate is reset usually once a year. As home loans have a long repayment tenure, even a slight change can have a significant impact on the interest payable. But home loan rates have been decreasing for quite some time due to cuts in the benchmark rate by the Reserve Bank of India. In case the change in interest rate makes it tough to pay your home loan EMIs, you can opt to extend the tenure to reduce the EMI.

  • Opting for balance transfer
    With the home loan balance transfer facility, you can switch lenders in case you are getting the loan at a lower interest rate. This enables you to benefit from the change in rate and reduce your overall interest outgo. But if you want a breather from the hefty pay-outs, then you can choose to increase the loan tenure for a lower EMI. However, make sure to weigh the loan transfer cost against the savings you shall make by switching lenders.

 

Now that you know the factors affecting your home loan EMI, you can consider changing tenures or making prepayment to avail maximum benefits. You can also take note of the prevalent interest rates and transfer your loan with a lender that offers lowest interest rates to get the benefit of lower EMI. Moreover, you can use an EMI calculator to see the effects of different tenure and interest rates on your EMI. Explore the best interest rates on home loans with Kotak Mahindra Bank, today.

 

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

 

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.