Who wouldn’t like to own a property that they could call their home? While owning a house is definitely one of the proudest moments of an individual’s life, it is also one that requires a lot of effort. Real estate can be quite expensive, which is why many homebuyers need to rely on home loans for financial assistance. Now, a home loan provides great coverage by funding about 80-90% of the cost of a property, depending on the loan amount. Financial institutions usually offer borrowers 20 years to repay the loan in monthly instalments.
While this sounds like a good deal, a few borrowers are worried about the interest payments of the loan. These concerns are valid as the interest rate of a loan can have a significant influence on the home loan EMI payments. However, this should not bother you too much. There are certain factors that lenders take into consideration while setting home loan interest rates and knowing about them can help in getting a better deal on the loan.
So, take a look at some of the major factors that influence a housing loan interest rate:
- Loan amount
Just because a lender can offer, a higher loan amount does not mean that you should take it. A higher loan amount increases the risk for the lender, which is why they might increase the interest rate. However, if you are ready to make a higher down payment and are fine with a lower loan amount, it can effectively bring down the home loan interest rate.
- Location of the property
Many borrowers are unaware of the fact that even the property location can have an impact on the interest rate of their home loans. If the property location is such that it is well connected to stations, stores, schools, hospitals, etc., the resale value of the property is most likely to increase. This is a positive sign for the lender, and they can offer a lower interest rate on the home loan.
- Credit record
Any financial institution will check the credit score of an applicant. This is to determine the applicant’s ability to repay the loan on time. Ideally, a borrower should maintain a credit score of 750 or more. This can even improve their chances of getting a lower interest rate on their housing loan.
- Employment stability
No lender would want a borrower with an unstable income, which is why they check the employment record of applicants. Borrowers with stable employment records working for reputed organisations are more likely to get offered a lower home loan rate.
Keep the above-mentioned factors in mind when you apply for home loan. In addition, before choosing a particular loan plan, it is advisable to use a home loan EMI calculator. This is to understand the loan’s EMIs beforehand, which will help in deciding whether the loan plan is suitable for your budget.