With the Reserve Bank repo rate remaining unchanged at 4%, most financial institutions across India have reduced their home loan interest rate to attract prospective home buyers.
The current low interest rates give individuals a favourable opportunity to invest in their dream house. Nonetheless, prospective borrowers must ensure to maintain sufficient income to guarantee that the ensuing loan burden remains under control and can be settled on time. Aspiring homebuyers should also remember that since lending rates depend on external benchmarks, they can change at any given time.
For instance, any change in the policy rates would increase or decrease the applied interest rate. These home loans come with an extended tenor, borrowers should look for the lowest home loan interest rate offered by different lenders and choose the most convenient one.
Apart from opting for the lowest home loan interest rate, individuals can also undertake a few measures that will ensure that their interest liability remains low. Following is a look at a few such factors.
How to get the best home loan interest rates?
Before availing a home loan, prospective borrowers need to be mindful of certain factors apart from complying with home loan eligibility.
Taking care of these factors can allow borrowers to secure a more competitive interest rate.
- Loan quantum or down payment
If a borrower chooses a home loan amount smartly, he/she can avail better interest rates. Therefore, it is recommended to make a down payment of about 20% of the property’s value. This would enable them to avail a lower loan amount. A higher loan value involves more risk to the financial lenders.
Thus, to secure a better interest rate, it is wise to make a substantial down payment, which will help ensure lower EMIs and overall interest rate.
- Credit score
An individual’s CIBIL score determines his/her home loan eligibility and the interest rate at which he/she will be servicing the loan. The score determines the borrower’s creditworthiness and is a standard parameter for a financial lender to gauge the fund amount to be disbursed. A lower credit score might lead financial lenders to levy high home loan interest rate.
Therefore, individuals with a credit score above 750 can avail the lowest interest rates. With a high credit score, an applicant gets an opportunity to negotiate rates with the lending institution. These are the basic things a borrower should know about CIBIL score on home loan.
- Balance transfer
To avail a better interest rate, individuals can look for a reliable financial lender offering a competitive interest rate to transfer their loan amount to. Refinancing would also help them to avail better terms and services.
Since the market is competitive, lenders offer exclusive deals to prospective borrowers that can be availed through balance transfer.
On the other hand, borrowers should also be aware of the additional fees and charges applicable. In this regard, one should know why to choose a home loan balance transfer and the amount that they can save after switching their outstanding loan amount to a preferred lender.
- Loan tenor
If a borrower chooses a shorter tenor, the principal amount can be paid off much faster. Moreover, choosing a shorter loan tenor will help borrowers to pay a significantly lower interest rate. The payable interest is calculated based on the outstanding principal amount.
Nevertheless, it is essential to keep in mind that choosing a shorter tenor will increase the monthly EMI outgo. Hence, individuals must assess the loan’s affordability before deciding the EMI amount and use a home loan interest rate calculator before opting for a feasible interest rate.
Some reputed HFCs also provide pre-approved offers to the existing customers to accelerate and simplify the loan application process. These offers are available on an extensive range of financial products such as home loans, loans against property and more. Check your pre-approved offer by submitting a few essential details.
With these factors into consideration, individuals can proceed to apply for a home loan against low interest rates.