Financial Tips to Boost Chances of Getting Home Loan at Lower Interest Rate
Last Updated on January 31, 2023 by hassan abbas
With real estate prices going up, it is not easy and affordable for everyone to own a home these days without some extra financial help. This is where the idea behind the home loan comes in. When you apply for a home loan, there are three aspects you should know the of-loan amount, loan term or tenure it is called, and interest rate, which actually determines how much will be your EMI or equated monthly installments. While you can choose the term and amount, the lender sets the interest rates. As a result, you must pick a lender that provides home loans at the lowest interest rates.
If you check home loan interest rates for all banks in 2022, you will see that it can either make it very smooth for you to repay or could be so hard on you that you end up missing your EMIs consecutively. In such a scenario, it is not surprising to wonder what could be done to be offered the lowest possible home loan interest rates. While the interest rate you get depends heavily on your financial profile, here are a few ways through which you can reduce your interest rates and get an affordable home loan EMI.
Keep your credit score high.
This, without the shadow of a doubt, can significantly help you get a loan at a lower interest rate that ultimately will affect your EMI obligation. Lenders can assess your creditworthiness and reliability using your credit score. As a result, having a good credit score is important to show a lender that you are creditworthy and that lending you money is not risky for them. Your eligibility for low home loan interest rates increases manifolds if your credit score is at least 700. You should aim to have a higher credit score throughout the term.
Negotiate with the lender smartly
If you can successfully negotiate with the lender, you can easily secure low home loan interest rates. If you have a high credit rating and strong credit history, use them to your advantage when negotiating interest rates with the lender. If you have a bank account with the lender and already have a good relationship with the bank, you may also use it as your leverage.
Clear your debts
Your credit score can be lowered if you have many debts and credit obligations running alongside. If you want to secure a home loan at low-interest rates, you must pay your bills on time and pay off any outstanding debts before applying for a home loan and checking home loan interest rates for all banks in 2022. Having too many loans, EMIs and dues can increase the possibility of you defaulting on EMI payments in the bank’s eye. The lender may raise the interest rate on your loan in this situation to compensate for the risk attached to your profile.
If everything doesn’t go in your favour, opt for a joint home loan.
Do you know you can increase your eligibility by adding a co-applicant? In some cases, it could even help you get low home loan interest rates. In the case of a joint home loan, the lender combines each applicant’s income and credit score to determine eligibility. Due to higher eligibility, you have a better chance of receiving low-interest rates on joint home loans.
Transfer your home loan
Existing home loan borrowers can also take advantage of a home loan balance transfer, which allows you to transfer the remaining balance of your loan to another lender in exchange for more favourable borrowing terms. Transferring your loan will result in the lowest possible home loan interest rates for you. While you can renegotiate a lot of your loan parameters at this point, a lower interest rate should be your top priority.
If your credit score is high, you may be able to refinance your home loan with a lender who will offer you a lower interest rate than the one you are currently servicing. For this, check out the financial marketplace to know the home loan interest rates for all banks in 2022. However, before doing the same, you must first perform a cost-benefit analysis to calculate your savings. Additionally, choosing government housing programmes and making a larger down payment can also help you get a lower loan interest rate.
Make a sizeable down payment.
The RBI permits lenders to grant home loans for up to 75 to 90% of the value of the property. Thus, you need to arrange or come up with the other 10 to 25% on your own. The interest rate you are given essentially depends on the level of risk attached to your profile. The loan amount, in this case, is one of the elements that influence the risk component. It is wise to pick a loan amount that you can readily pay back, considering your income and other financial commitments. Putting down a sizable share of the property price yourself is one of the ways to convince your bank that you are capable of repaying the home loan. A bigger down payment lowers the loan amount and, thus, lowers the risk factor attached to your profile.
If you currently have a fixed-rate loan and would like to reduce your home loan interest rate, you can move from a fixed rate to a floating rate. It is because an interest obligation with a fixed interest rate is typically higher than one with a floating interest rate. Finding a fixed home loan interest rate is rare these days because the majority of lenders provide variable interest rates at competitive rates.
Now that you are aware of which factors can affect home loan interest rates, you will be able to make a wise choice in regards to which factor to work on in order to secure a home loan with low-interest rates. Though it is advisable that you optimize your credit score and arrange the funds to make a down payment to ensure your home loan application doesn’t get rejected. Maintaining a strong financial profile, keeping your credit score high, and staying away from unnecessary loans are a few of the ways to get the lowest home loan interest rates. Another thing you should thoroughly do is research loan options and compare home loan interest rates for all banks in 2022 before deciding on a certain loan provider. You might be able to find a more thorough breakdown of the rates and other fees levied by various lenders on a number of third-party websites
Apart from this if you are interested to know about Want to Buy a property? Choose the Best Estate Advisor and Get the Right Property then visit our Real Estate category.