For most individuals, buying a house is considered one of the most significant achievements in life. It is no surprise how expensive real estate prices can get, which is why most homebuyers rely on home loans to arrange the required finances. Most financial institutions offer up to 20 years to repay the loan, which gives borrowers ample time to pay off the home loan in monthly installments.
Before applying for a home loan, it is imperative to look at the interest rate the lender is charging. This is because the interest rate can significantly affect the monthly installments of the home loan. Financial institutions set an applicant’s home loan interest rate based on certain factors. Being aware of them can help bring down the housing loan interest rate.
So, take a look at the factors that influence the home loan interest rate:
1. Employment record
Lenders always evaluate their applicants’ employment records. This ensures the loan will be repaid on time without any financial difficulties. Having a steady employment record and an excellent monthly income is vital for getting a competitive loan. Borrowers with good income stability are more likely to be offered a lower home loan interest rate.
2. Location of the property
Even the property’s location can influence a home loan’s interest rate. A property with a good resale value, thanks to its good infrastructure, connectivity, amenities, etc., is more likely to fetch a lower interest rate than an old property with a low resale value.
3. Credit record
Financial institutions always check the credit records of their applicants before approving loan applications. This is why it is so essential to maintain a good credit score before you apply for a home loan. Keeping a credit score of 750 or more is best, as this can get you benefits like a higher loan amount at a lower interest rate.
4. Loan amount
For a higher loan amount, a borrower is likely to incur a high interest rate, too. This is why it is advisable to try to make a high down payment, which will help reduce the loan amount. With a low loan amount, the lender faces less risk, so they can offer a lower home loan rate.
Before speaking with a lender, keep the factors mentioned above in mind, as they can help lower your home loan rate. In addition, it would be wise to use a home loan EMI calculator beforehand. This makes it easier to understand whether the lender’s interest rate is suitable. It is also essential to check your home loan eligibility with the lender. This is to know the loan amount the lender is willing to offer based on your eligibility.
