Unlock the Secrets to Savings: 6 Proven Strategies to Trim down Your Home Loan Costs

Buying a home is a significant financial commitment, but there are ways to minimize the burden. Smart strategies can help you effectively reduce your home loan costs and secure your financial future.

Opt for a Larger Down Payment

Choosing to pay more upfront when buying a house can help lessen the mortgage cost. It makes the loan smaller, which usually means cheaper interest rates, and saves funds while you repay the loan. If you pay more money initially, your monthly payments are smaller and easier to handle. This lessens stress. Also, when you make a big initial payment, you can finish paying the loan faster, and this helps save a lot of interest.

To put aside more money for a big initial payment, people can use methods like making a budget and cutting down costs,  saving windfalls like bonuses, and looking into possibilities of getting financial help or gifts from family members to make the journey to owning a home easier.

Imagine you are buying a house that costs ₹ 20 lakh. If you make a down payment of ₹ 4 lakh, which is 20%, rather than the usual 10% or ₹ 2 lakh, you might save several thousand rupees during the period of your loan. If you choose a bigger initial payment on a 30-year loan with an interest rate of 4%, it might save more than ₹5,00,000 in total interest costs during the time you repay this loan.

Choose a Longer Loan Tenure

Choosing a longer repayment period for the mortgage affects how it works in many ways. It results in smaller monthly payments, which gives people who have taken out loans some ease immediately and improves cash flow. However, making the loan period longer requires a lot of thinking because it means you will pay more interest throughout the term of the loan, which can greatly increase total expenses.

Also, borrowers should look for loans that allow early repayment to reduce the long-term effects of longer periods. This allows them to finish paying off their debt sooner and spend less on interest fees. Choosing a longer loan requires considering the immediate cost against future financial effects.

If you choose a 30-year loan instead of a 15-year one for a ₹15,00,000 home loan at 4.5% interest, your monthly payments drop from ₹9,547 to ₹7,608, giving you immediate relief. However, you might end up paying over ₹7,00,000 in total interest.

Compare Lenders and Negotiate Interest Rates

To cut down costs on a home loan, it’s important to compare different banks and discuss the interest rates with them. Knowing how much these rates affect your payments means looking carefully at all the details online and offline. Look at not just the rates but also any extra fees or charges while also considering how good their customer service is and what people think of them.

When you want to negotiate, showing a strong credit history and steady income is good. Use your connections with banks or people who lend money and look for any special deals they have. Using these methods helps you get better conditions for borrowing, which means the total amount you pay back for your home loan will be less, improving your financial situation over time.

If you are looking for a home loan of ₹ 30 lakh, and if you compare different banks and talk to them to lower the interest rate by half a percent, it is possible that throughout 20 years for the loan, you might save more than ₹ 1.5 lahks just in how much interest you pay.

Make Periodic Prepayments

Making occasional extra payments on your mortgage is a smart financial move. It helps you manage your finances better and reduces the total amount you pay over the loan term. It makes the length of your loan shorter, so you can finish paying off what you owe quickly and become the full owner of your house earlier. Also, paying in advance saves a lot of money on interest over the time you have to repay the loan, improving your financial situation.

To pay your loan faster, you can use extra money like bonuses or tax returns to make additional payments. You may also raise the amount of your EMI payment occasionally or give bigger sums of money when you can at certain periods. But be careful with these extra payments. Going through the advance payment parts and fines in your loan contract is important so you know about any costs or limits that come with it.

Also, having enough cash available and money for emergencies is very necessary to protect yourself from unexpected problems, making sure you can keep up with your financial duties easily as you pay off your home loan faster. With careful application of these techniques and safety measures, you will be able to handle your mortgage well and reach financial independence more quickly.

Imagine you take a home loan for ₹25,00,000 with the period to pay back being 20 years and the interest rate is 8%. If eou pay an extra amount of ₹50,000 before it is due every year, this can shorten your payment time by almost 4 years and help you keep more than ₹6,00,000 that would have gone towards paying interest.

Opt for a Home Loan Balance Transfer

Choosing to transfer the balance of a home loan can be beneficial in certain situations, mostly for getting better terms and features. When borrowers move their loans to another bank, they might pay less monthly and save on total interest costs, which could help them better manage their money.

Starting a balance transfer for a home loan comes with many important steps. First, the person who borrowed money must check their existing loan conditions and how much they still owe to see if moving the loan could benefit them. Next, it is very important to do detailed research and compare what different lenders provide to find the best choices. Lastly, looking at the costs for transferring and calculating possible savings helps decide if the balance transfer will save money over time.

Imagine you have a home loan for ₹20,00,000 at an interest rate of 9%. If you switch to another bank that gives you an interest rate reduced by 0.75%, you can save more than ₹2,50,000 in the total interest paid across 15 years.

Maintain a Good Credit Score

Maintaining a robust credit score is pivotal for securing favourable interest rates on home loans. Lenders scrutinize these scores to gauge lending risk, often correlating higher scores with lower interest rates. Timely bills and EMI payments showcase financial responsibility while limiting the credit utilization ratio, which enhances creditworthiness. Furthermore, refraining from excessive loan or credit card applications safeguards credit scores.

Suppose one elevates their score from 750 to 800; a potential 0.25% interest rate reduction could yield substantial long-term savings on their home loan repayment.


Understanding home loans is complex and needs careful attention and a planned strategy. CreditDharma underlines the need for the wise handling of finances and the use of chances to lower expenses. Under the guidance of home loan experts at Credit Dharma, people can pursue their goals of owning a home with confidence and, at the same time, improve their financial health.