22 MARCH, 2022

Who wouldn’t like to have a place of their own? While this is a dream that is shared by many, it is definitely not an easy one given the current real estate prices. Most homebuyers rely on the support of home loans for financial coverage. While a home loan proves to be a great help in arranging the funds for purchasing a property, it is also important to first make sure the loan can comfortably be repaid. For this, one needs to make sure that their loan has an affordable interest rate.

Financial institutions offer different rates based on their terms and conditions as well as the applicant’s profile. Many people are unaware of the fact that there are ways in which they can effectively bring down the housing loan interest rate.

So, let’s take a look at a few tips that can help in getting a good rate when you apply for a home loan:

1. Try for a higher down payment

Home loans do not cover the entire cost of a property. Depending on the loan amount you have applied for, a home loan can cover up to 80-90% of the property value. You will have to cover the remaining amount from personal savings, which is considered as the down payment. If you are comfortable with a higher down payment, you will require a lower loan amount, reducing the lender’s risk. This is when the lender can offer a lower home loan interest rate.

2. Always maintain a good credit score

No matter what type of loan you are applying for, financial institutions will always check your credit score before approving the loan application. Ideally, it is best to maintain a credit score of 750 or more, as this can get you a better deal on a home loan plan. Lenders prefer borrowers with good credit records and can offer them low interest rates on home loans.

3. Clear off the loan as soon as possible

Most home loan borrowers prefer to go for a long repayment tenure. This is because the EMIs are much easier to pay off over a longer period of time. However, you should know that the interest of the loan is added with each instalment. So, by clearing the loan sooner (and effectively reducing the number of monthly instalments), you actually end up saving on the loan’s interest payments.

4. Transfer your home loan

It is possible that you have already taken a home loan a while back and now find current deals to be much better. Do not worry, this does not mean that you have missed out on favourable benefits. Many borrowers opt for a home loan balance transfer, which involves transferring their home loans to new lenders. One of the most common reasons for this transfer is the revised home loan rate offered by the new lender. Paying off the loan’s EMIs with even a slightly lower interest rate can have a significant impact on the overall cost of the loan.

These tips can help bring down the interest rate of your home loan. In addition, it is advisable to make use of Kotak’s home loan EMI calculator to understand whether the interest rate being offered by the lender is an affordable option.

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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.