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Know How to Reduce Home Loan Interest Burden

HomeFinanceKnow How to Reduce Home Loan Interest Burden

Most people opt for a home loan in India for purchasing a house to avoid a strain on their finances. This is why borrowers are always on the lookout for ways to reduce home loan interest rates which can significantly reduce the final payable amount and contribute to savings. 

Read on to find out about ways to reduce mortgage home loan interest rates and other related features that will help applicants. 

5 Tips to reduce mortgage home loan interest rates

Taking a loan from a reputed lending organisation is the most important step for getting feasible interest rates on home loans. Apart from that, following these simple points will help borrowers get competitive rates on home loans:

  1. Opt for a shorter tenor 

The term of a loan is one of the key factors that influence the interest rate. Although the EMI payments are reduced with longer loan duration, shorter tenors reduce the overall interest amount. 

  1. Compare interest rates of different lenders

Before selecting a particular loan provider, borrowers should conduct thorough research on the loans and the interest rates that different lenders are providing. Various loan providers have a free online tool that lets the applicants compare the EMI and interest rates of different providers. Hence, conduct thorough market research is important to avail a home loan at the lowest interest rate.

  1. Maintain a high credit score

Since a high CIBIL score reflects good credit history, it is the easiest way to ensure the lowest possible interest rates on home loans. A high credit score is indicative of a good track record for debt repayment. Most lenders consider someone with a credit score of 750 or above as an ideal candidate for a loan. 

  1. Make a larger down payment

Most financial institutions in India provide 75-90% of the value of a property as a loan amount which is known as the loan-to-value (LTV) ratio. Making a larger down payment reduces the overall loan amount. Doing this also increases a person’s loan eligibility as it reduces the lender’s risk. The lowering of the loan amount directly reduces the interest rates on a home loan in India. 

  1. Opt for a home loan balance transfer

Applicants usually take the help of the balance transfer feature when the interest rates of their current loan providers are too high. Through this process, borrowers can switch to a different reputed lender offering lower rates of interest while repaying a home loan.  

However, applicants should research other charges related to the balance transfer process before making the shift. They must also inquire about the terms and offers of the lender, such as the application process, loan tenor, home loan foreclosure fees, etc. 

Apart from the above-mentioned points, several other factors affect home loan interest rates which borrowers should be aware of.

3 Factors affecting home loan interest rate

Here are 3 important factors that influence housing loan interest rates and can help an individual save more during repayments. Here are the top 3 factors to take note of:

1. Financial stability of an applicant

Since a stable source of income or a high salary indicates better loan repayment capacity of a borrower, it reduces the lender’s risk and also the rate of interest.

2. Type of home loan interest

The interest rate type that a candidate opts for a home loan has an impact on interest outflow. Floating interest rates on home loans are usually 1-2% lower than fixed rates. 

3. Value of property

A property’s age, location, condition, infrastructure, etc. determine its worth. When a property is considered as valuable, lenders offer competitive rates of home loan interest on it. 

Lenders also specify certain home loan eligibility parameters which depends on the amount of loan an individual is eligible for. 

Home loan calculator 

Aspiring loan takers can check their home loan eligibility and also enhance them with the help of a home loan eligibility calculator. This is an online tool that lenders provide on their websites for free. 

Moreover, borrowers can use a home loan EMI calculator to compute monthly payables and total interest of their loans accurately. 

Besides, many loan providers extend customised pre-approved offers on secured loans, such as home and property loans which streamline the process of loan application and approval. Eligible candidates can check their pre-approved offers by entering details, such as their names and other details on the lender’s website.

Ensuring low home loan interest rates will put borrowers in an advantageous financial position. Carefully comparing the terms and rates of different lenders before applying for a loan will significantly decrease the overall housing loan liability.

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