Buying a house is the biggest dream of one’s life and requires careful consideration. If you are someone who is looking to take out a home loan to purchase your dream house then you must know about the home loan rate of interest. It helps you to decide how much extra you need to pay in addition to the principal amount. In simpler terms, it is the cost of borrowing money from a lender to buy a house. The rate of interest for housing loan differs from lender to lender with other factors involved.
What is Interest Rates?
When you borrow some amount of money, the additional amount charged on the money lent determines the interest rate. Besides, when you save or invest, the interest rate shows the growth or return you receive on your savings. In a home loan, you need to pay both the borrowed money from the lender(loan) and the fixed interest rates through monthly EMIs. Currently, different banks in India offer different interest rates starting from 8.30 % p.a to 8.35% p.a, with the Bank of India offering lower interest rates. Understanding it is important for making the right decision when financing a home. There are strategies that you can use to find the best rate of interest for your home loan.
Strategies to Find the Best Home Loan Interest Rates
Let’s learn about the proven strategies that reduce your home loan rate of interest and help you in achieving your dream. By following these helpful tips you can easily manage your monthly EMIs, making your home loan journey less stressful.
Choose a Feasible Loan Tenure
Loan tenure is an important aspect of house financing. It refers to the duration of time over which you will be paying your loan back. When you opt for a longer loan tenure your EMIs eventually reduce and make a surge in your interest rates. On the other hand, a shorter loan tenure means huge EMIs but lower interest rates. Both the options come with some advantages and drawbacks, therefore it is your responsibility to choose the one that is more feasible for you.
Improve Your Credit Score
When you apply for a home loan, lenders first check your credit score to decide how much interest rates they will charge. A higher credit score means lower interest rates, while a low credit score means high interest rates. This makes it important for you to maintain a good credit score in order to get a feasible interest rate for your home loan. If you have a low credit score, you can improve it by paying your previous loan on time, by only applying for one loan at a time and avoiding opening too many credit card accounts. All in between, you can get help from an EMI calculator and find out the precise amount you will be able to borrow.
Make a Higher Down Payment
Another way to get the best interest rate is to make a higher down payment. If you are making a high amount of overpayment you can easily lower the interest rates on your loan. This way your monthly EMIS will be smaller and make your loan a little less riskier for the lender. However, this may not be practical for people who are short on money.
Transfer Your Home Loans
If you are in your 3 or 4 years of repaying your loan and have a good repayment history you can transfer your loan to another lender who is offering a lower interest rate. This process is called Home Loan Balance Transfer and is only available to limited banking institutions. But, before making a switch, it is important to calculate the amount that may be involved in the process such as processing fees and foreclosure charges.
Conclusion
Home loan rate of Interest impacts your loan in many ways but finding the best can improve the overall cost of purchasing a home. Therefore, it is important to find a lender that not only offers lower interest rates but also offers other favorable terms. By following the above strategies you can easily lower your housing loan rates, making the process of owning a house more affordable.
