Buying a new home is an important event in an individual’s life. Some consider it a milestone. The home-buying process requires careful planning, especially when it comes to getting the best home loan offer. Applying for a home loan is a great way to get the desired funds for buying your dream home. But before applying for a home loan, you must consider the EMIs (equated monthly instalments) and the interest rate.
Many banks and HFCs (Housing Finance Companies) offer different home loan options, and choosing the right one can be overwhelming, especially if you are a first-time loan applicant. Also, knowing how to get the best home loan rates is crucial. So, we list down a few tips for your perusal.
Make a higher down payment
When you apply for a home loan, the lender will sanction a maximum of 80-90% of the property’s value. You must pay the balance amount from your pocket. This is called a down payment. If you have sufficient funds and afford it, you can pay a higher down payment than the minimum required amount. This way, you can borrow less, get a home loan at the best interest rate, and save a significant amount on the interest payments over a period.
Choose a shorter home loan tenure
Generally, lenders in India offer home loans for a maximum of 30 years, and many people opt for a longer repayment tenure to reduce the EMI. However, they don’t realise that longer tenure means paying higher interest.
So, if you want to get a home loan at a lower interest rate, choose a shorter tenure. You can choose the home loan EMI calculator to compute the interest rate on different tenures and choose the suitable term so that the EMI is affordable.
Revise the EMIs every year
Today, many lenders allow you to revise the EMIs. So, if you get a salary hike or your business income increases, you can increase the EMI. For example, if your income increases by 10%, you can consider increasing the home loan EMI by up to 5%.
Regularly reworking the EMI may seem insignificant, but every time you increase the EMI, your overall home loan tenure will reduce, and so will the home loan interest rate.
Transfer your home loan to a new lender
If you think your current home loan lender is charging a higher-interest rate than other lenders or you are not satisfied with their services, you can transfer your home loan to a different lender. After your home loan transfer process is complete, you can repay the balance amount at a lower interest rate or the remaining tenure. However, you must do your research well about the charges involved in transferring the home loan before making a final decision.
Use your high credit score to negotiate a better offer
Lenders in India consider credit score as one of the critical factors while determining your home loan eligibility. They have a minimum credit score requirement, which ranges from 700 to 750, and they prefer lending to applicants who have a higher credit score as this reflects their high repayment capacity.
So, if you have a high credit score of more than 750, you can use it to your advantage to negotiate a better deal with the lender and get the loan at a lower interest rate than the interest rate offered to other applicants.
Now that you know how to get the best home loan rates, do your due diligence and borrow accordingly for a hassle-free repayment experience.