Source: Times Property (

In such a scenario, home loan borrowers should expect their EMIs and overall interest cost to increase steadily, at least in the near future. Borrowers who wish to maintain their existing EMIs would have to contend with increased loan tenures, resulting in greater interest cost burden in the long term.

Both prospective and existing home loan borrowers should consider the below tips to reduce their EMI burden and/or interest costs:

Full/Partial Prepayments of their Existing Home Loan
Banks and housing finance companies (HFC) allow home loan borrowers to prepay the outstanding home loan balance, in partial or full, with the objective of reducing their overall interest costs. Additionally, borrowers can either opt for EMI reduction or bring down their loan tenure after making the prepayment.
Reducing their loan tenure would lead to higher interest cost savings when compared to the EMI reduction option. Existing borrowers should go for EMI reduction only if the increase in EMIs due to rising interest rates adversely affect their financial position. Otherwise, they can select the tenure reduction option after making loan prepayment.

Select the Home Saver Option
Many banks and HFCs provide home loan overdraft facility –branded as home saver, home loan advantage etc. – for borrowers looking for higher liquidity. Under this facility, the lender opens an additional overdraft account (in the form of savings or current account) where the home loan borrower can park their surpluses and later withdraw from the account based on his cash flow requirements. The lender would then calculate interest costs after deducting the surplus parked in the savings/current account from the outstanding home loan amount. The overdraft facility allows home loan borrowers to derive the benefit of making prepayments without sacrificing their liquidity.

Opt for Home Loan Balance Transfer
Home loan balance transfer allows borrowers to transfer the outstanding balance from their existing home loan to another lender at lower interest rates. The new lender would first pay the outstanding home loan amount of the existing borrower to the original lender and then, sanction a new home loan to the borrower at a lower interest rate and/or for a longer tenure. This option is especially suitable for existing borrowers who availed home loans at higher interest rates due to their poor credit profile but are now eligible for home loans at lower rates as their credit profile has improved. Home loan borrowers can also opt for balance transfer if their existing lenders refuse to lower the interest rate on their home loan.

Increase your EMI
Borrowers can also reduce the interest cost of their ongoing home loan by requesting their lender to increase the EMI amount. This option should be suited for borrowers having sufficient surplus out of their monthly income after factoring in their existing EMIs and unavoidable expenses. Usually, banks and HFCs prefer the EMI/NMI (Net Monthly Income) ratio, i.e. the total monthly repayment obligation for all loans, of their home loan borrowers to be within 50-60 per cent of their net monthly income.