17 MAY, 2021

The interest rate of home loans affects the cost of borrowing significantly. A high interest rate can increase the total repayment amount. Similarly, even a slight variation in the interest rates can alter your Equated Monthly Instalment (EMI) and total outstanding balance. Therefore, it is important to take a home loan from a lender that charges a low interest rate. Additionally, the home loan interest rate is also dependent on your eligibility. Which means you can try getting a lower rate of interest by improving your eligibility.

Here are some factors that can help you get a lower interest rate on your home loan.

Factors That Can Help You Get a Lower Interest Rate

Credit score

A credit score is an important determinant of your creditworthiness that can affect your home loan interest rates. Lenders usually charge a higher rate of interest when they consider you to be a high-risk borrower who is more likely to default. If you have a high credit score, it can be an assurance for the lender that you could repay the loan timely. Lenders usually prefer a credit score of 700 and above. If you apply for  a home loan with a poor credit score, the lender could reject your application or offer you the loan at a higher interest rate. You should regularly check your credit report to ensure that the credit score is not falling below 700, if you plan to take a loan anytime in the near future.


Taking a joint loan is one of the easiest ways to improve your home loan eligibility. High eligibility can help you get a lower interest rate. Lenders consider the income of your co-applicant which is helpful to enhance the eligibility. You can avail a joint loan with your working spouse or independent children to increase the chances of getting a lower rate of interest on a home loan.

Down payment

When you pay a higher down payment, your stake in the property increases, reducing the risk for the lender. So to get a lower rate of interest, try paying a higher down payment. A higher down payment also means lower outstanding balance, which in turn could help you save on the interest. Moreover, the amount of down payment and interest rates are usually inversely proportional. So, if you can pay a higher down payment you are more likely to get a relatively lower rate of interest.


Having a longer tenure gives ample time for you to repay the loan comfortably. This assures the lenders that you are unlikely to default in EMI payments. This assurance can help you get a lower interest rate.

Location of the property

If the property is located in a remote area, the lender can charge you with a high-interest rate. 

It is because liquidating such property can increase the lender’s cost in case of default. On the other hand, if the property is located in the prime/posh location of the city, you can get a lower interest rate on the home loan. Similarly, if the property is old or worn out, lenders can charge a higher interest rate for the same reason.

There are various other factors that determine your home loan interest rate, such as the LTV ratio, job profile etc.  If you have a stable job profile with steady flow of income, you are more likely to get a lower rate of interest. Whereas, LTV is the ratio of the loan amount to the property value. Lenders usually charge a lower interest rate when your LTV ratio is lower.

Getting a lower interest rate can help you save a lot of money. You can consider the above-mentioned factors to get a lower interest rate on your home loan. Meanwhile, you can apply for  home loans from Kotak Mahindra Bank that offers among the lowest interest rates in the market currently.


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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.