Home loans are a massive financial responsibility and a long-term commitment. With the average home loan tenor stretching between 20 to 30 years and taking up a significant portion of one’s monthly income, it is only smart to borrow keeping one’s income and repayment capacity in mind. It is also equally important that borrowers avail themselves of an affordable home loan by securing the lowest home loan interest rates their credit profile makes them eligible for. This brief guide discusses the factors that impact the rate of interest that home loan borrowers are extended on their home loans and how to use an understanding of these factors to secure an affordable home loan. So, read on.
How to Secure an Affordable Home Loan: Simple Tips That Will Come in Handy
1. Pay as High a Down Payment as You Comfortably Can: Depending on your home loan amount, your lender will decide the minimum down payment to be paid by you. The down payment required is higher if the property being bought with the loan funds is an expensive property, ranging above Rs.75 Lakh. For low-value properties, lenders generally settle with 15% of the home loan amount as the down payment. 15% to 25% is the minimum down payment that you must to secure housing finance. However, if you can afford to pay a higher loan amount, you should save as high a down payment as possible. This will have a positive impact on your home loan in multiple ways. A high down payment will reduce the loan amount, thereby automatically leading to economic EMIs. More importantly, paying a higher down payment will enhance your negotiating power and the power to ask for a low rate of interest on your home loan, which in turn, will help you secure higher return on investment.
2. Check Your Credit Score Well in Advance: Your credit score is important. It tells your lender whether they can trust you to clear your loan EMIs on time or not. It also tells them how much debt you have, how punctual you have been regarding its repayment and whether or not your are excessively dependent on credit. A high credit score will work in your favour and help convince your lender of your ability to handle all kinds of debt with utmost ease, invoking in them confidence in your repayment capacity and therefore, the right to negotiate for a low home loan interest rate loan or an affordable loan. The ideal CIBIL score for home loans is 750 or above. A few months before you are to apply for a home loan, check your CIBIL score. If it is less than 750, take immediate action to bring it to the appropriate number.
3. Research and Compare Offers: There are at least a hundred different lenders to choose from in the markets today. Banks, NBFCs, commercial lenders, etc., borrowers have no scarcity of options to pick from. Unfortunately, this overabundance of options can make life difficult if you do not play smart. So, if you are planning to apply for a housing loan, one of the first things you must do is make a list of the most trusted and reputable lenders in the market. After you have created this list, approach all the lenders on the list and request them for the best loan offer that you can get. Finally, use a housing loan EMI calculator to compare all the offers. The housing loan EMI accurate is free, quick and accurate. With it, you will easily be able to figure out the most affordable home loan deal for you.
4. Check Your Housing Loan Eligibility: The advent of technology has made life much simpler. The innumerable online tools available for free can make the process of availing housing finance much simpler. One such tool is the housing loan eligibility calculator. This online tool can be used to assess the home loan amount that one is eligible for. The calculator computes this number based on the information entered, such as the total income, current expenses, EMIs, etc. The use of the housing loan eligibility calculator can increase your ability to negotiate for the best home loan interest rate deal by telling you the loan amount that you are eligible to apply for. When you apply for a home loan amount that you are eligible for, your ability to negotiate for the most desired loan terms and conditions increases.
Final Words
Securing an affordable home loan is not a difficult task if you have an understanding of the factors that impact home loan interest rates. Other than the tips mentioned above, opting for a low LTV ratio loan, pledging high-quality collateral, and choosing to go for a long-tenor home loan will also help you secure housing finance on the most beneficial loan terms and conditions.
