Buying a house is considered to be one of the biggest achievements in an individual’s life. However, real estate can be very expensive, and this is why most homebuyers apply for home loan plans. This gives them the financial support they need as well as a tenure as long as 20 years to repay the loan. While a home loan can be a great option, it is also important to think about the home loan rate before getting the loan. The interest rate can make a significant difference to the EMIs of the loan, which is why it is necessary to get an affordable rate.
Now, there are certain factors that lenders take into consideration while determining the home loan interest rate. It is important to be aware of these factors before applying for a loan. There have been cases where borrowers have got stuck with a high interest rate simply because they were not aware of these factors.
To avoid this and ensure a smooth repayment, look at the 4 factors that affect home loan interest rates:
- Credit score
A borrower’s credit score can have a major impact in determining their home loan’s interest rate. This is because a credit score indicates creditworthiness, which helps the lender understand the borrower’s repayment capability. A poor score would lead to a high housing loan interest rate and vice versa.
- Property location
Many people do not know this, but even the location of the property they are buying will have an impact on the interest rate they get offered on the housing loan. A house that is in close proximity to grocery stores, shopping centres, railway stations, bus stops, schools, etc. is more likely to have a higher value as compared to a house that isn’t, which is why lenders prefer to offer a low interest rate to borrowers who are buying houses in good locations.
- Employment status
By working for a reputed organisation and having a steady monthly income, it is quite likely that you will be able to afford a home loan. This is why lenders trust borrowers with good employment records, and hence offer them low housing loan interest rates.
- Loan amount
Giving a borrower a high loan amount is considered to be a higher risk for the lender. This is why they can set a high interest rate on the loan. However, if you choose to put down a higher down payment and decrease the loan amount, the lender can then offer you a low interest rate.
These are some of the major factors affecting the housing loan interest rate. Do keep them in mind before applying for a home loan to get a good deal on the loan. Also, it is advisable to use a home loan EMI calculator that will help in understanding whether the interest rate being offered is an affordable option.