Making a significant financial commitment such as purchasing a property, and then having to pay a large mortgage each month can become challenging for an individual. As a result, many borrowers will try to find alternative ways to reduce the cost of their monthly mortgages without compromising their financial goals.

This article provides information regarding several common and practical methods to help you decrease your mortgage Monthly Payment with loan management improvement methods. If you are obtaining a new mortgage or currently paying your mortgage, you can find several cost-effective ways to save money over time.

Compare home loan interest rates before applying.

Most homebuyers make the big mistake of applying for the very first mortgage offer they can find. Keep in mind to compare lenders and find one that can offer you a lower home loan interest rate; this will immediately reduce your EMI.

Before you finalize your lender, compare the following:

• Floating and fixed-rate options
• Processing charges
• Prepayment options
• Balance transfer possibilities
• Offers for salaried and self-employed individuals

Even a slight variation in the interest rate can make you save a considerable amount in the long term.

Make a Higher Down Payment

A higher down payment reduces the principal loan amount, and when the loan amount is reduced, your EMI will also become more likely to be manageable.

For example,

• Higher down payment on the property to reduce the amount borrowed
• Less burdened with monthly EMIs
• Less interest shall be paid over the entire loan period.

The next step is to see if you can work out a larger deposit before you even make the home loan application.

Consider Using the Home Loan Balance Transfer Facility

If your present lender applies a high-interest rate on your home loan, consider transferring your remaining loan balance from an existing lender to a new lender that has a lower interest rate.

A balance transfer can have many advantages. Among them are a lower EMI, better repayment conditions, a possibility of obtaining a top-up loan, and more loan flexibility.

Most borrowers use this method due to changes in the market and are typically done when market rates have dropped.

Increase Your EMI as Your Salary increases Throughout Your Employment Life.

As your income continues to grow each year, make an effort to increase your EMI a little each time, as it will help you with both reducing your loan term and saving on the total interest charges.

This strategy can work for all salary earners who have received annual increases, business owners with growing income levels and/or young professionals who wish to create long-term savings.

Saving just a small amount once a month can make an incredible amount of difference over a long period of time.

If you can make part payments each month, it will help reduce your home loan obligations. You can use some of the extra money you get from:

• Bonuses
• Incentives
• Tax refund
• Business profits
• Renting out property

to pay down your outstanding principal amount.

What does it mean to pay down the outstanding principal amount?

• Reduce your future EMI payment
• Shorten your loan term
• Reduce interest payments

Most mortgage companies will allow you to make partial prepayments of your home loans at no cost/penalty if the loan is on a floating rate basis.

Have A Good Credit Score

If you want a lower interest cost and/or a more favorable mortgage, you need a good credit score. If your credit score is above 750, this increases your chances of obtaining a mortgage on better terms.

Maintain Your Credit Score:

• Pay EMIs and credit card bills ON TIME
• Do NOT apply for multiple loans at the same time
• Keep your credit utilization percentage low
• Check your credit report regularly

You can lower your EMIs through the use of a better credit score.

Opt for Flexible or Step-Up EMI Plans

Many lenders provide borrowers with the option to select flexible payment plans that allow for lower EMIs in the beginning and increase the amount of the EMIs over time, as their income increases. This type of payment plan is perfect for young professionals who anticipate future income increases.

The benefit of offering a flexible payment plan for credits is to enable the borrower to have less financial burdens when purchasing a new property.

Rental Income – Utilise it wisely

If you have another home that has the potential to generate income through rent, you can use this income to help in making your monthly EMIs.

You can use your monthly rental income for:

• Paying a portion of your EMI
• Making prepayment on your EMI
• Reducing financial pressure on you
• Increasing your total monthly savings

Many property investors and working professionals use this type of financial planning strategy.

Avoid Co-Signing Multiple Loans at once

When you take out a personal loan, auto loan, credit card loan, or other types of debt that represent additional liability alongside your current mortgage, you put yourself at an increased risk of becoming overwhelmed with financial obligations; therefore increasing the amount of financial pressure on you and decreasing your ability to repay your debt.

When looking to manage your home loan EMIs, only take out debts or obligations you absolutely need while still making payments on your mortgage to reduce your chance of experiencing a financial hardship during the repayment phase of your mortgage.

You my also want to consider financial planning using a Loan Against Property for expanding your business or other large expenses rather than accumulating multiple smaller high interest loans.

Be Prepared for an Emergency Fund

An emergency fund is critical throughout the term of your mortgage. There are many unexpected events (loss of employment, health, and business) that could impact your ability to pay your mortgage each month.

Having an adequate emergency fund will help with the following:

• Prevent Defaulting on Your Mortgage Payments
• Maintain a Good Credit Score
• Lower Financial Stress
• Continue Monthly Mortgage Payments without any Issues

Having stable finances is key to properly managing your mortgage loan.

The Right Financial Planning Can Reduce Your Monthly Payments

Although finding a lower interest rate on your mortgage will help save you money on your monthly payments, proper financial behaviour, making timely payments, and using the right repayment method all contribute to lowering your monthly payments.

By making small changes such as making partial payments, comparing lenders, increasing your down payment amount, and maintaining a good credit score, you can substantially decrease the amount of interest you will owe on your mortgage at the end of the term.

Many mortgage borrowers are now looking for financial solutions from services like 5Sikka to better understand their options for loans and repaying those loans prior to making an application for a mortgage.

Common Inquiries

Is it possible to lower my monthly payment after I’ve been approved for my house financing?

Yes, lowering your monthly payment can occur by changing lenders (transferring the mortgage) to one with a lower interest rate or making a larger down payment and/or getting a longer-term loan.

If I make a prepayment, do I have the option of lowering my monthly payment or lengthening my repayment term?

Most lenders allow prepayments to decrease your monthly payment or shorten your loan term when you do so.

Can transferring my mortgage to another lender help me lower my monthly payment?

If another lender can give you a better interest rate and loan terms than what you currently have, transferring your mortgage to them would likely reduce your monthly payment and the interest you pay in total.

What credit score do I need to qualify for a low-interest mortgage?

In general, a credit score that exceeds 750 will result in receiving competitive interest rates when applying for a mortgage.

Does putting down a larger down payment reduce my monthly payment?

Putting down a larger down payment results in being able to borrow a smaller dollar amount, which results in a lower monthly payment amount.

Is longer-term financing always better than shorter-term financing?

Having a longer loan payment term will typically lower your monthly payments; however, it will also increase the aggregate amount of interest you pay over time. Therefore, you should select a repayment period based on your ability to repay the loan and your financial plans.