Buying a house of your own requires a lot of preparation, especially if you are planning to go for a loan to fund it. However, with the rising prices of properties along with the increasing rate of interests charged on such loans, buying a home seems like a long lost dream. However, this post provides you with some useful tips which will help you get the most competitive home loan interest rates.
If you have ever calculated the interest factor which you pay when you borrow money as a home loan, then you will realise how much more you end up paying into your home loan account. It is then that you understand that difference of even one percent in the rate of interest creates so much of a difference. To help you and give you the advantage of a lower rate of interest, just follow these useful hacks to get the most competitive interest rate on your home loan:
- Opt for floating rate instead of fixed rate: Home loan interest rates are of two types, fixed and floating. Fixed, as the name suggests implies one standard rate of interest which gets levied on your home loan account from the day the loan is disbursed till the day the loan account gets closed. On the other hand, floating rate of interest means such rate of interest which will change whenever there is any change in the lender’s rate. So when the rate of interest falls, automatically you will benefit from it particularly if you think that the existing rate of interest is indeed higher.
- Choose the right lender: If you believe that the rate of interest applicable on home loans is same irrespective of the type of financial institution you are opting for, then you are sadly mistaken. It is because the RBI issues a repo rate which serves as a cut-off rate and then the banks, as well as the NBFCs, have to decide the rate which they want to make applicable. Hence, it is essential that as a prudent buyer you do indulge in some window shopping before you settle for ‘the one’ lender.
- Go for a bigger down payment: Another wise thing to do when deciding to go for a home loan is to opt for a bigger down payment. The reason for this is quite simple. When you pay a bigger chunk of money, you automatically need less amount of loan. When the principal amount is only less, the interest factor will also be quite reasonable.
- Bargain! Bargain and bargain some more: Yes, you heard it right! When you go loan shopping to different banks, NBFCs or any other lending institutions, you should make it a point to know the best deal which they can offer on home loans. If you have a one to one interaction with the manager or sanctioning authority, then you may even get some rebate. As the competition in the market is quite fierce, lenders are ready and willing to do anything for the customers. So why not make most of this situation!
- Improve your credit history: The western concept of credit history has become a popular rage in India as well. To understand the credit worthiness of the loan applicant, banks and NBFCs often trace the credit history of the applicant which includes checking how good or bad paymaster the applicant has been in the past. There is a particular cut off score also ascertained above which if the applicant scores, then he is offered a loan at a lower rate of interest. However, if the score is below the required cut-off score, then you may have to deal with a higher rate of interest. Hence, to avoid falling into the latter situation, make sure that you maintain a good credit history.
So make sure that you make a note of these simple but important points while making your home loan application and get ready to move into a house of your choice at the rate of interest you would like!