Top Factors That Badly Affect Your Home Loan Interest Rates - Loan Trivia


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Thursday 1 April 2021

Top Factors That Badly Affect Your Home Loan Interest Rates

One of the most prominent factors deciding your home loan affordability is the interest rate. It definitely does vary across lending institutions, depending on market conditions. However, many applicants might not be aware of how these rates can be negotiated depending on their property characteristics, eligibility, and financial habits. Here are some of the top factors affecting home loan interest rate and ways in which individuals can save on the same.

  1. Poor Employment History: Most lending institutions mandate employment stability to gauge an applicant’s repayment capacity. Individuals with frequent job changes, low income, or poor business turnover are likely to incur high housing loan rates for security.
  2. Unimpressive Credit History: A 750+ CIBIL score and clean repayment history are ideal when availing housing loans. It also provides power to borrowers during negotiations for lower home loan interest rates. Additionally, you can enhance your credit score by restricting your credit limit usage to 30%.
  3. Loan Amount and Tenor: Generally, financial institutions charge high-interest rates against very high or very low loan amounts and long tenor. Using a loan EMI calculator can help individuals determine an amount and tenor according to their affordable interest rates.
  4. Property Value and Location: Properties located in areas with good connectivity, like extensive railway and road networks, and close to hospitals, ATMs, airports, etc., have greater value. Lenders prefer investing in such properties with high resale value and generally offer lower home loan interest against them.
  5. Down Payment: Larger the down payment you make, the lower will be the loan principal you acquire. Also, a down payment exceeding 20% of property price displays greater repayment capability and attracts lower interest rates.

Additionally, interest rates can also vary with their type: floating and fixed. Considering and improving upon these factors before applying for a home loan in India can help individuals avail considerable interest savings.

Lastly, do not forget to compare the rates offered by various housing finance companies. Depending on a lender, such rates can vary tremendously in some cases.

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