Individuals owning a land property can pledge it to get a land mortgage loan and meet their substantial financial requirements. Land mortgage loans are a type of loan against property that provide borrowers with financial assistance to meet their requirements.

A mortgage loan comes with lower interest rates than other loans because it is secured by collateral, and their interest can be further reduced following some essential tips. Reduced loan interest rates can help one to save on the overall interest payable. 

Top 8 ways to reduce the land mortgage loan

• Keep a check on credit score

Borrowers may neglect their credit score while applying for a land mortgage loan, given it is a secured loan. However, this is entirely a misconception and individuals applying for a land mortgage loan should maintain a higher credit score above 750. This is because a higher CIBIL score implies the borrower’s creditworthiness and enhances the chance of getting lower rates.

• Look around with multiple lenders

Individuals can compare the interest rates offered by different lending institutions before selecting one. It will help them to decide on the best mortgage loan interest rates and choose accordingly.

However, interest rates also depend on the type and area of land subject to a mortgage. So, borrowers can use a land calculator to estimate their land value first. It will help them acquire better interest rates.

• Opt for a higher down payment

One of the effective ways to reduce the interest rate on loans against property is by making a higher down payment initially. It will help reduce the loan amount and thus, borrowers shall bear lower interest rates while repaying the loan. Moreover, if the loan amount is low, a borrower can opt for a shorter loan term and save money.

• Choose a short tenor

Lenders offer a higher loan tenure for mortgage loans. But it is advisable to keep it shorter to make maximum savings. This is because a long tenor can reduce the EMI amount, but on the other hand, it increases the land mortgage loan interest outflow. Consequently, a shorter tenor will make borrowers pay higher EMIs, but it will help reduce the interest rate considerably.

• Opt for prepayment or a part payment

Many lenders allow the borrower to make a prepayment or part payment to reduce the interest burden. Borrowers who opt for a floating interest rate can make prepayments without paying any extra charges. However, in the case of fixed rates, a certain amount of fee is levied during prepayment.

• Negotiating with the lenders 

Another effective way to cut down land mortgage interest rates is by negotiating with the lender. Borrowers should negotiate the lending institution’s terms and conditions and meet the eligibility criteria for LAP before opting for a loan. Moreover, they can ask for discounts on account of a good repayment history with the same lender. 

• Choose the EMI amount carefully

Paying a higher EMI can drain the borrower financially, but it will help them save on the interest outflow in the long run. However, selecting a higher EMI to reduce the loan interest can trouble the borrower in meeting other financial needs. So, an individual should always choose the loan and EMI amount as per their capability and get suitable interest rates. Moreover, they should check their land value using a land calculator online before deciding on the loan amount.

• Consider refinancing

Refinancing is another way to reduce the interest rates on a mortgage loan. A borrower can transfer the loan to another lending institution offering a low-interest rate compared to his existing lender. It will help them save a substantial amount on the mortgage loan interest rate. 

Maximum lenders provide pre-approved offers to their existing borrowers, considering their creditworthiness and timely EMI payments. Borrowers can enter their basic details like name and contact details and check their pre-approved offers from the lender’s website. These offers are also available on various other financial products like home loans and can help one streamline the loan application process.

Borrowers looking for lower land mortgage interest rates should consider the following factors before applying for a loan. Moreover, borrowers should also keep a check on things to avoid while availing of loans against property. It will help them secure the best land mortgage loan offers and save money on the overall loan.

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