Want to know some factors that may affect your Home Loan interest rate? Read on to know the six vital factors and be better prepared!
A home is most probably the most expensive investment that one could ever make in a lifetime.A home buying decision is also the one that will surely affect your monthly income and cash outflows for many years. If you are going to purchase a home on a Home Loan and if you avail a higher interest rate, it will affect your lifestyle for a long time.
Thus, let’s provide you some factors that can affect your Home Loan interest rate.
The credit score determines your creditworthiness o lenders. If you have been maintaining a robust CIBIL or credit score, nothing should stop you from availing a lower Home Loan interest rate. If you don’t have a good credit score, your House Loan may be approved, but at a higher rate of interest, making it very difficult to cope with it as the time passes. Thus, you should try to have a good credit score of at least 750+.
The home that you wish to buy
Lenders put differently located homes under different risk categories based on their rates and locality. Thus, the home which you wish to buy may also impact your Housing Loan interest rate. If you are going to purchase a home as your primary place of residence, creditors may consider it as a low-risk prospect compared to homes which are second residences. If you are going to buy a riskier property, you may be awarded with strict underwriting terms and with a higher Home Loan interest rate.
Home Loan amount
Lenders charge a higher rate of interest if you are going to apply for a lower or a higher amount of loan. Thus, the trick is to put down a higher down payment amount so that the remaining part of the Housing Loan gets fetches a lower interest rate, making it affordable.
Down payment size
As stated earlier, the more down payment amount that you put down, the lesser amount of interest rate that you will pay for the remaining part. It depends on lenders to lenders as to what percentage of a down amount they want you to put. However, it is a good idea to put down at least 20% down payment so that you have to pay only the interest rate on the remaining 80% percent.
Home Loan tenor
A Home Loan tenor is nothing but the total time that you select for the repayment of your House Loan. Know this – the longer the tenor, the higher the Home Loan interest rate. Thus, try to opt for a shorter tenor of Home Loan so that you don’t have to repay a loan amount with a higher rate of interest.
Having a stable job
When lenders see that you have a stable employment history, they are confident that you may repay a housing loan much easily. As a result, if you have a Home Loan to apply, make it a point to have at least 3 years of employment to be eligible.
The Bottom Line
Thus, these were some of the factors that may impact your Home Loan interest rates. It depends on a borrower’s perspective as to what he/she makes of it and tackles things to work it in their favor. Want to apply for a Home Loan? Check your Home Loan eligibility to know more!