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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.
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.
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.
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.
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.
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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