Interest rates levied on home loans is a significant factor of this financial product as accumulated interest payable constitutes a lion’s share of the debt. Therefore, it is imperative to check home loan interest rates before applying for one.
At the same time, you should also learn about the factors that can affect this rate –
Credit score
One of the deciding factors for interest rates on housing loan is the credit score of borrowers. Since it measures your creditworthiness, with a low credit score, you will not receive a competitive interest rate on your housing loans. On the contrary, if you can maintain a high score, you can then negotiate with the lender to extend credit to you at a lower rate.
Current benchmark rates
It is another crucial factor in deciding the rate of interest on housing loans. For instance, loans with MCLR rates are revised after a pre-set period of six months or a year. At this interval, any alteration to the MCLR rates will change the rate of interest as well. Hence, your home loan rates may increase or decrease marginally throughout the tenure.
Location of the property and its age
Property Location and its total value also make a significant impact on home loan interest rates. Therefore, if you decide to purchase a house in a locality with good amenities and transportation access, it will have a higher resale value and they are easy to sale. Resultantly, it will be easier for you to acquire funds and negotiate a more competitive interest rate on the home loan. On the other hand, a property with poor amenities will limit its resale value and loan terms.
Additionally, the age of property also plays a pivotal role here. HFCs charge favourable interest on purchase of a new property when compared to old ones.
Home loan interest rates are also affected by the tenure of it. With a longer tenure, you are likely to get a low-interest rate compared to that of an advance with a shorter tenure.
