Having your own home is a dream of most of you people. While there are many lenders offering home loans in India nowadays, individuals tend to select those with the lowest interest rates. One of the most important variables influencing house buyers’ decision to choose a lender is the rate of interest on the loan.
You may now easily find a lender who will offer you a house loan at a competitive rate due to increased competition among lenders. If you’re a potential home buyer looking for the best home loan schemes, you should be aware of the several factors that affect home loans.
Tenure of Loan
Despite the fact that lenders provide you several years to repay your home loan, you should attempt to get the shortest term possible. Even though the EMI amounts are larger, shorter loan terms attract lower interest rates. If your loan tenure is long, your EMI may be small but you will end up paying a lot of interest. You can use a Home Loan EMI Calculator to calculate your EMIs and choose the shortest possible loan term with easy – to – manage EMIs according to your credit worthiness.
The Property’s Location
The interest rates you are charged will be influenced by the location of the property you are purchasing. The resale value of homes in areas with good amenities and connectivity will be higher. Newer properties are thought to be more valuable, whereas older homes are thought to be less valued. Lenders see homes with a high resale value as a profitable investment and charge lower interest rates for them. For homes with a lesser resale value, interest rates will be higher.
Interest rate type
There are two types of interest rates offered by the lenders- floating and fixed. The floating ones vary according to the base rate. Throughout the tenor, the fixed rates remain untouched or unaltered. Floating interest rates are usually 1% to 2% less than interest rates that are fixed. Note that variable rate changes affect the tenor rather than the installment you pay. As a result, fixed-rate loans are a good choice if you want more clarity about the repayment time.
Good credit rating equals good creditworthiness. A good credit score helps you to negotiate a reduced interest rate, whereas a bad credit score means you’ll pay a higher interest rate.
If you work for a reputable corporation or a government agency, you will have excellent job security. This implies you’ll have a consistent source of income until you retire, which reduces the risk for lenders. As a result, depending on the nature of your job, you may be eligible for lower interest rates from various financial institutions.
The applicant’s gender
This is also an important consideration for your Home Loan, as many financial organizations give women lower interest rates. Borrowers who are women are entitled for a 0.5 percent discount on interest rate.
Payment in advance
A greater down payment generally will lead you to a cheaper interest rate. This is because lenders see a lesser amount of risk when you have a larger down payment. So, if you can safely put down 20% or more, go for it—you’ll almost always obtain a cheaper rate.
The Bottom Line
As we can see, a variety of factors influence the interest rates charged by a bank on house loans. Some home loan plans are more appealing than others due to small variances in these characteristics. To receive the best home loan interest rate, be sure that all of these elements, both direct and indirect, are working in your favor.
As a result, you must carefully evaluate these aspects when applying for a Home Loan in order to benefit from cheaper Home Loan interest rate. This will allow you to save a significant amount of money on interest costs.