18 FEBRUARY, 2022

The pandemic and work from home scenario have made people realize the value of having a comfortable house. Naturally, many people are investing in a house property that gives them comfort and fits their budget. Home loans often emerge as the preferred option to buy a home. However, you must know that the interest rate can significantly impact the cost of borrowing and loans can get drastically affordable with low-interest rates. Though the lender decides interest rates, there are ways you can get affordable interest rates.

 

Factors that affect housing loan interest rates

Following are some factors that affect your home loan interest rates:

 

  • Credit score

Lenders use a credit score to determine the risk they bear by lending you money. Your credit score is measured on a scale of 300-900, the highest being 900. You are more likely to get higher interest rates if you have a low credit score, i.e. below 700.

 

  • Job profile

Usually, lenders prefer applicants who have a steady source of income and stable employment. Therefore, often-salaried employees are offered lower interest rates as compared to self-employed. If you have switched jobs recently or are a freelancer, lenders can offer you high-interest rates to cover the risk.

 

  • Type of interest rate

You can avail a home loan at floating or fixed interest rates. Though fixed interest rates are constant for the tenure, they are often a few points higher than the floating interest rates. So, if you choose a fixed interest rate, you can be charged higher.

 

Apart from these factors, your income, location and value of the property in question, loan amount, etc., also affect your home loan interest rates.

 

How to get an affordable home loan at attractive interest rates?

You can get an affordable home loan with low-interest rates. Following are the ways to get a low-interest rate on your home loan.

 

  • Maintain a low credit score

Before applying for a home loan, check your credit score. If it were low, it would be best to delay the application and improve the score. Also, check the credit report. If there are any discrepancies in it, you can request the credit bureau to make a rectification in it.

 

  • Negotiate with the lender

While availing a home loan, negotiate with the lenders for your interest rates. Often lenders are open to negotiations based on your credit profile and financial status, depending on how you negotiate. 

 

  • Maintain a stable job profile

Your job profile and employment status can help you get lower interest rates. If you are planning to avail a home loan, avoid making any significant changes to your job or profession. In addition, it could help you get lower interest rates if you are employed with a government or a reputed private organization.

 

Apart from improving your profile, paying a higher down payment can also help you get affordable interest rates. Also, opt for a longer tenure as it reduces the chances of default. Moreover, ensure that you do not borrow more than you can repay, check your affordability with a home loan EMI calculator.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.