28 SEPTEMBER, 2021

Buying a house is an achievement that anyone would be immensely proud of. With the real estate market prices so high, most borrowers turn to home loans for financial support. However, many people are worried about facing difficulties in the future because of their home loan interest rates.

This should not come in the way of an individual and their dream house, especially when there are multiple ways in which home loan interest rates can be brought down.

Mentioned below are a few effective ways in which you can reduce home loan interest rates.

  • Keep a good credit score

The higher your credit score, the lower the home loan interest rate. It is always good to keep a credit score of 750 or above. If the credit score is low, you might have to pay high interest on the loan. A good credit record can be maintained by clearing all existing debts and paying credit card balances on time.

  • Make a large down payment

If you are okay to make a larger down payment on the purchase of the house, you’d would require a lower principal amount. Since lenders calculate the interest rate based on the principal amount of the loan, this is a great way to reduce interest payments for the loan. To get a better interest rate on the housing loan, you would generally need to pay a minimum of 20% of the purchase price of the house as down payment.

  • Maintain your job stability

Financial institutions provide home loans to applicants who have a record of steady employment for at least two consecutive years. Constant job switches will require you to pay a high interest rate while applying for the loan.

  • Negotiate with the lender

It is also possible to start negotiations with the lender regarding the interest rate being offered. In case you are an old customer and have a good standing with the lender, it is quite likely you will be offered a better interest rate. It is also advisable to consider various lenders in order to get an understanding of a suitable housing loan offering.

  • Choose a shorter repayment tenure

Many borrowers opt for longer repayment tenures so that they would have to pay smaller EMIs. However, they also end up paying more interest that keeps getting added with every home loan EMI. By choosing a shorter repayment tenure, you as a borrower will have to pay more in EMIs, but can also end up saving on the interest by cutting down the total number of monthly instalments.

Make sure to go through the above-listed steps, as they are effective in bringing down the interest rate of a housing loan. Also, it is always advisable to use a home loan EMI calculator to learn about the estimated home loan EMIs.

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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.