Home Loan Interest Rates – How They can Help You to Buy a Home

Thinking of buying your own home, or a second residence that you intend to let out on rent? When you apply for Home Loan, consider the Home Loan interest rates first. This is the vital factor that affects your monthly commitment towards the loan.

Home Loan Interest Rates

There are several factors that affect your Home Loan eligibility, and also the approval process. These include your income, age, your monthly expenses, other loan repayments, your employment type, your credit rating, and your savings and other investments as well. All these are details concerning you, the loan applicant.

There is one more factor that concerns the lender and their loan terms –  the Home Loan interest rate. This is another important element that can affect loan eligibility.

Here is how:

  • After totaling your relevant net income and subtracting all your monthly outgo, the remaining amount is considered for loan approval
  • If the remaining or surplus amount is around 40 to 50% of your income, you may be a good prospect for the loan
  • The Loan EMI is determined by the lender based on many factors
  • The interest rate plays a vital role
  • If the interest rate is high, the loan EMI will also go up correspondingly
  • If the EMI goes beyond what the lender considers as your repayment capacity, the loan amount might be reduced

So, how do you enhance your chances for getting the loan amount you want at favorable terms?

Prepare for the Home Loan

A home purchase is very fulfilling but it is also a huge financial commitment. Make sure your expenses form a manageable portion of your income. Your monthly outgo including other loan EMIs if any, should not be huge. You should have funds to spare for other expenses and for the Home Loan EMI.

Create savings in secure deposits like Fixed Deposits. Build up a good investment portfolio in growth instruments like shares and Equity Mutual Funds while you are young. You can also put aside a portion of any extra funds you get through selling assets, through inheritance in a savings or fund for buying a home.

These savings and investments will help you save up enough for making a large down payment on the property you wish to purchase, bringing down the necessary Home Loan amount. These savings can also provide you a backup in case you have to deal with any financial crisis.

Shop for Home Loan Offers

When you want a Home Loan, don’t just go to any lender and just settle for their first offer. Compare various banks and NBFCs and use tools like Home Loan eligibility calculator and Home Loan interest calculator to get a list of offers at the lowest Home Loan interest rates.

Now go through the offers and select one or two lenders to approach. Never apply for a lot of loan offers simultaneously as this will bring down your credit rating and decrease the chances of loan approval. Before applying, make sure you can afford the EMI for the loan amount you are considering. Use a Home Loan EMI calculator to find the ideal EMI that you can handle.

Increase your chances of loan approval for the amount you want:

  • Ensure you have a good CIBIL score of 750 and above before you apply for the loan
  • Make sure you can spare the monthly installments on the loan
  • Show proofs of savings and investment as an insurance against any financial crisis
  • Don’t apply for an amount that is much higher than what you need
  • Bring in a co-borrower
  • Make a larger down payment on the property to reduce the loan amount


How to Reduce Interest Rates?

Look at the lending rate system, get a loan from banks or NBFCs that follow MCLR system. This way, your interest rate goes down with repo rate.

Opt for shorter tenor Home Loans and make a larger down payment. All these will bring down the interest component of your Home Loan.

This is a good time to buy a home as lending rates have fallen rapidly. The real estate industry is also just recovering from a difficult phase, property prices are low and builders are trying to get rid of their backlog. They are selling units in completed projects at reduced prices to raise funds for new projects. Make sure you have the credit rating and financial resources needed to get a Home Loan. Apply for a loan, keep all the necessary documents required for Home Loan ready to speed up the loan approval process.

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