Less Known Pointers that Can Affect your Home Loan Rates

A home loan is a secured option that comes with a longer tenor. Opting for a longer tenor may reduce your home loan EMIs. 

It may help you to manage other outlays in the month easily. But, you also have to deal with a higher home loan interest rate. 

But other than a longer tenor, many less-known factors also affect the interest rate of home loan in India. 

Let’s know more in this quick post so that you can avail yourself of the lowest home loan interest rates in India!

1. The location and value of your new home 

If your home that you want to buy using a home loan is located in a well-known place with basic amenities, you may enjoy the lowest home loan interest rates. It is because your lender will find it liquidating your property easier if you default. Also, the value of your property determines the applicable home loan interest rates. 

2. Your credit utilization 

If you have a credit card or avail yourself of another credit line and used a large part of it, you may not get the lowest home loan interest rates. It is because your lender may consider you to be depending on your credit limits to manage expenses. Hence, while applying for a home loan, ensure to lower your credit utilization. 

3. Your debt to income ratio 

If you have already many debts on your head, a large part of your income may go towards your EMIs. In this case, your income may not have room to make way for another loan. Even if a lender approves your home loan application, it may be at a higher rate. 

You are now aware of elements that most borrowers don’t consider while applying for housing finance. You should consider them and work on each of them to enjoy the lowest home loan interest rates. 

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Top Factors That Badly Affect Your Home Loan Interest Rates

One of the most prominent factors deciding your home loan affordability is the interest rate. It definitely does vary across lending institutions, depending on market conditions. However, many applicants might not be aware of how these rates can be negotiated depending on their property characteristics, eligibility, and financial habits. Here are some of the top factors affecting home loan interest rates and ways in which individuals can save on the same.

 

Poor employment history:

Most lending institutions mandate employment stability to gauge an applicant’s repayment capacity. Individuals with frequent job changes, low income, or poor business turnover are likely to incur high housing loan rates for security

Unimpressive credit history:

A 750+ CIBIL score and clean repayment history are ideal when availing housing loans. It also provides power to borrowers during negotiations for lower home loan interest rates. Additionally, you can enhance your credit score by restricting your credit limit usage to 30%.

 

Loan amount and tenor:

Generally, financial institutions charge high interest rates against very high or very low loan amounts and long tenor. Using a loan EMI calculator can help individuals determine an amount and tenor according to their affordable interest rates. 

 

Property value and location:

Properties located in areas with good connectivity, like extensive railway and road network, and close to hospitals, ATMs, airports, etc., have greater value. Lenders prefer investing in such properties with high resale value and generally offer lower home loan interest against them.

Down payment:

Larger the down payment you make, the lower will be the loan principal you acquire. Also, a down payment exceeding 20% of property price displays greater repayment capability and attracts lower interest rates.

Additionally, interest rates can also vary with their type: floating and fixed. Considering and improving upon these factors before applying for a home loan in India can help individuals avail considerable interest savings.

Lastly, do not forget to compare the rates offered by various housing finance companies. Depending on a lender, such rates can vary tremendously in some cases.

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