At the end of July 2020, the home loan segment grew by 12.3% y-o-y. With the banks and HFCs cutting down their interest rates, the worry for availing home loans at higher interest rates is put to an end.
Home loan interest rates are slashed down to increase affordability for homebuyers. These favorable terms can lower liabilities significantly.
Primarily, an individual should opt for an option with the lowest home loan interest rate. In the long run, even a difference of 0.5% in housing loan interest can end up saving one a considerable amount in interest outgo.
Before applying for a home loan, it is crucial to meet the eligibility criteria that come with it. However, there are few tips to reduce interest rates for home loans.
Tips to reduce interest rates for the home loan application process
- Shorter tenor- It is a common notion that a longer tenor will decrease monthly installment amounts, but shorter tenors will cut down the total interest outgo altogether. With a housing loan EMI calculator’s help, one can check interest rate reduction concerning tenors before applying for a home loan.
- Prepayments- During the initial years of the loan, a borrower pays more towards the interest part than the principal amount. Frequent prepayments can bring down the interest amount considerably. With floating rates, the lenders do not charge for prepayment.
- Comparison of interest rates online- It is evident that customers will want to compare the home loan interest rates before opting for a suitable scheme. With lower rates, the housing loan EMI is also limited.
- Home loan balance transfer- One can transfer the remaining principal amount to another HFC at a lower rate of interest if the existing lender’s charge is on the higher side. But it is important to make sure that there are no missed payments.
- More down payment amount: Making a substantial down payment can substantially reduce loan amounts. This, in turn, will reduce interest rates.
Additionally, what type of interest rate is suitable for availing housing loan is a point of consideration.
Types of interest rates to choose for home loan application
Fixed interest rate: An interest rate independent of market forces is called a fixed interest rate. With this rate of interest, one can easily forecast the EMIs. It is ideal to go for this if the home loan interest rate is low while taking the loan. To avail a steady interest rate, this option is suitable.
Floating interest rate: As the name suggests, this rate of interest varies over the loan’s tenor. It is not possible to estimate the EMIs with certainty with floating rates. The advantage of this is when the rates drop; one can expect benefits instantly for a home loan. Customers who are up-to-date with the real estate market can go for this type of interest loan. This home loan interest rate is for applicants expecting the interest rates to fall soon.
Additionally, home loans are easily available for those who meet the eligibility criteria before the application process.
Eligibility criteria to apply for a home loan
- Age- Salaried persons’ age should vary from 23 to 62 years, whereas self-employed persons should be between 25 to 70 years.
- Citizenship: Both categories of applicants should be residing Indian citizens to avail a home loan.
- Work experience: Minimum work experience is 3 years and 5 years, respectively, for salaried and self-employed people.
With a home loan eligibility calculator help, one can check eligibility before applying for a home loan.
Therefore, home loan interest rates can decrease with the right schemes and products after following certain strategies.