Home loan: Apply for Housing at a Very Low Interest Rate in India
According to reports, there has been a reduction in home loan interest rates by around 2% in the last 5 years. Consequently, with lenders offering the lowest home loan interest rates, now is a favourable time for potential borrowers to apply for the credits. Since home loans are high-value, long-term credits, even the slightest changes in interest rates can significantly impact the total loan cost.
For instance, a loan amount of Rs.1 crore acquired for a tenor of 20 years at an interest rate of 8.5% would incur a total interest outgo of around Rs.1.08 crore. An increase in the interest rate by only 0.10% would hike the total interest amount to be paid to around Rs.1.09 crore. Comparing the two values, the latter value is around Rs.1 lakh higher than the former. Hence it is of paramount importance to opt for the lowest home loan interest rate to maximise savings.
Illustrated below are various ways to lower home loan interest rates.
Maintaining a good credit score
The credit score acts as an indicator of an individual’s creditworthiness. According to the guidelines set by the RBI, financial institutions take note of a borrower’s credit score to charge the home loan interest rate beyond the external benchmark rate. While home loan lenders are lenient when it comes to approving credits to borrowers with a lower credit score, the effect of the same is felt on home loan rates.
Financial institutions invariably charge higher interest rates from borrowers who don’t possess a credit score above 750. If your credit score is low, check which is the best credit score for home loan and how to improve yours.
Applying for a home loan jointly
You can avail a low home loan interest rate by initiating the home loan process with your wife and making her the primary applicant. A joint home loan also increases the benefits of a loan, alongside the eligibility to avail it. Several financial institutions also offer a concession of around 0.5% in home loan interest rates for women compared to the general rates.
A joint home loan affects the credit score of an individual. Since the credit score is a vital parameter for loan approval, you must know how your credit score gets affected when you apply for a joint home loan.
Increasing the down payment amount
The loan amount availed determines the home loan interest rate as a higher advance increases the lenders’ credit risk. As a result, to accommodate the increased risk, borrowers are charged a high interest rate.
As a substantial down payment amount implies applying for a lower home loan amount, all potential borrowers seeking a lower interest rate must make a greater contribution towards their down payment amount. This would help reduce their home loan interest rates.
A high down payment amount allows a borrower to pay off a loan faster. Paying off a loan punctually can help earn several benefits.
For instance, financial institutions provide pre-approved offers which help in simplifying and accelerating a lending process. These offers are provided on various financial products like home loans, loans against property, and more. Borrowers can check their pre-approved offer by providing a few details such as name and contact number.
A potential borrower can take the assistance of a home loan calculator to determine the EMI amount payable to settle a loan, which would help them manage his/her finances accordingly.
Since the interest rate plays a vital role in making budgetary plans, one can also use the home loan interest rate calculator available online.
Additionally Read: Budget 2021: Additional Deduction on Home Loan Interest Extended Till March 2022
Comparing lenders
An individual must consider the rates offered by different lenders before settling for one. This will help in availing the lowest home loan interest rate.
Thus, it is evident that a potential borrower can avail the best rates by taking the above-mentioned factors into consideration.