Acquiring a lower interest rate on your home loan can drastically help you have a lot of money.
The proportion of the principal amount charged by the lender to the borrower for using the principal amount is known as the home loan interest rate. The cost of your house loan is determined by the interest rate set by banks and non-financial organisations. As a result, when you pay your home loan EMI, the interest rate charged decides how much you must pay your lender each month on your loan.
The Coronavirus outbreak has compelled Indian banks to cut house loan interest rates to a 15-year low to increase consumer confidence at a time when the economy is suffering and property purchasers are wary of job security issues.
Government laws have been revised regularly to meet the changing needs of home buyers and the dynamics of the real estate market. That is most likely one of the reasons why house loans are eligible for the section 80C tax deduction. Home loans also come with a slew of other tax advantages. So you must choose the lowest home loan interest rate in the market to afford your dream house.
The finest buying opportunity for homebuyers has been extended by RBI pouring much-needed liquidity into the market as well as many governments and developer concessions, such as stamp duty exemptions. Banks are now discriminating between strong and poor developers for lending purposes, thereby enhancing balance sheet efficiency and minimising over-leveraging.
Borrowers often expect that if a bank lowers its interest rate to, say, 6.7 per cent, they will be able to secure a home loan at that rate. This assumption is incorrect. In the face of rising default rates, lenders take a variety of steps to mitigate risk, including closely scrutinising borrowers’ characteristics.
How to Achieve Lower Interest Rate?
- It would be incredibly useful for you to invest in the proper places before you apply for a home loan. You can put the money towards a down payment on a house. If you’ve already paid a large sum at the start of your house loan, the amount you’ll borrow will be less, and so the interest rate will be lower
- Women and salaried individuals benefit from financial organisations as well. For example, many lenders give house loans to women at five basis point lower rates.
- Making a house loan prepayment is one of the most effective strategies to save money and lower the loan interest rate. If you want to pay off your home loan early, you must be financially disciplined and determined. Furthermore, if a borrower chooses to prepay the loan, he or she will not be charged pre-closure fees if the interest rate on the home loan is adjustable (floating).
- Those with good credit scores are granted the best home loan rates. Because your financial history implies that you are responsible, a strong credit score assures the lender that you are a good borrower. To check where you stand at your credit score and ways to improve it, first obtain a copy of your credit report to understand how your credit profile appears to potential lenders. If you are aware of this, you can take steps to enhance your credit score. You can pay to find your credit score on a variety of websites.
How to Calculate Your EMIs and Choose the Best Home Loan Interest Rate?
Using home loan EMI calculator, you can figure out how much interest you’ll pay on your loan. You’ll need to fill in the fields on the calculator with the following information: home loan amount, loan interest rate and loan duration.
Manually, you can use the following formula to calculate the EMIs:
EMI = [P x r x (1+r)^n]/[(1+r)^n-1]
Wherein, P is Principal, r is the rate of interest, and n is a number of instalments or loan tenor in months.
So, if you take a personal loan of Rs.20 lakh for a 5-year term at 10% interest, your EMI will be Rs. 42,494. On the other hand, if the same 5-year loan is taken at an 8.50% interest rate, your home loan EMI will be Rs. 41,033. You can also use our home loan EMI calculators available online.
In addition, if you are someone who already has taken a home loan, you can use the option of a home loan balance transfer to shift to a lower interest rate with another lender. A home loan balance transfer allows homeowners to transfer their outstanding house loan to a new lender in exchange for a reduced interest rate or better loan terms. Almost all lenders have the option of transferring a house loan to their customers. However, borrowers must know that regularly paying your loan EMIs is crucial to being able to avail of the loan transfer service.
Since home loans are high-value loans, even a decimal point-level reduction in home loan interest rates can lead to huge savings in the long run. So it’s imperative you do thorough research and finalize on a lender that offers the most competitive interest rate.