Mortgage Loan Interest Reduction – Smart Ways to Reduce Your Loan Liability

Mortgage loans are financing options available with a long repayment tenure, mostly extending over a decade. While the length of the loan term can go up to 30 years with some lenders, the standard tenure extension goes between 15 and 20 years. Even so, it is  quite a long duration, which allows the borrower to make repayment as per his/her convenience. Nevertheless, a long tenure also means more time involved in servicing the advance holding the lender liability. Now, as the interest levied on loans is also a charge that lenders recover for the time of such lending involved, a long tenure automatically increases the total mortgage loan interest.

Since the entire mortgage loan framework itself leads to a significant amount accumulating as interest payable, borrowers must be cautious towards and intending to reduce this amount in total. We thus bring some smart ways that you can utilise to help reduce your overall mortgage loan interest burden, increasing the overall loan affordability in the long run.

Top 7 Ways to Reduce Interest on Your Mortgage Loan

Before going further into the ways to reduce interest on mortgage loans, it would be good to be clear about the two primary ways for such reduction. You can either try out for interest rate reduction right at the onset of borrowing. Or, if you have already borrowed the loan, you can try out ways that would help reduce the interest payable directly.

Before availing the loan

You can try out the following ways for interest rate reduction before applying for and availing the loan.

  • Lender comparison

When deciding on your mortgage loan offer, it is important that you compare loan options provided by different lending institutions in the market. Keeping yourself well-informed about the loan offers and rates applicable on them gives a wider perspective on loan availability and also leaves you with a better opportunity for negotiation with your lender for securing low rates on the advance.

  • All income document submission

When applying for the mortgage loan, it is best to provide all primary and secondary income documents to your lender. Doing so allows you to represent a high repayment capacity, reducing the overall risk associated with you as a borrower. It thus allows the lender to assess low interest levy possibility and approve your loan based on that, which ultimately reduces the total loan liability.

  • Credit score improvement

Your credit score can directly impact the overall interest rate levy as it indicates the borrowing risk associated with you based on previous repayment patterns and financial discipline followed. A credit score above 700 is considered suitable for the purpose of borrowing funds, whether secured or unsecured.

  • Higher down payment

In case the mortgage loan you are availing is a home loan or if any other advance availed and being utilised for big-ticket purchase such as vehicle, you would be needing to make a down payment. While a stipulated upfront payment in such a scenario is mandatory, making a down payment higher than the minimum requirement onsets a positive financial reputation for the borrower, allowing him/her to negotiate for better rates.

  • Loan amount selection lower than maximum eligibility

You can also select a loan amount for borrowing lower than the maximum financing value available as per your property benign mortgaged. It has two primary benefits. For one, it does not stretch your finances unnecessarily. Secondly and more importantly, the mortgage loan interest accumulating on such value would be low.

  • Short tenure selection

You can also choose a short tenure for mortgage loan repayment, which automatically reduces the total interest payable on the advance due to lesser time involved. It can also prompt the lender to levy a lower rate due to early repayment chances..

After availing the loan

Once you have already availed a mortgage loan, you can still look forward to reducing your total interest liability payable to the lender as initially decided through the following ways.


At any time before the loan tenure’s end, you can choose to repay a part of the total loan liability in a lump sum. As it reduces the loan principal at a go, the total interest payable for the loan on property is also checked.


Another prepayment option, the foreclosure facility allows a borrower to close his/her loan account through complete repayment of the loan liability. Since it occurs before the tenure’s end, interest liability is reduced for the time that is saved too.

Balance transfer

Midway during the loan term, a loan on property borrower can also choose to transfer the outstanding loan principal to a new lender offering reduced rate of interest, which ultimately brings down the interest

While these ways work quite well when reducing your mortgage loan interest, you must make all financial decisions related to your loan cautiously. A diligent borrower always weighs the pros and cons related to each borrowing and repayment decision he/she makes for maximised benefits.

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