Do you dream of owning a house? If yes, then you are like most of us who look for the security of their own personal property. This means a home loan is imminent and the ensuing EMIs certain. Though many individuals are eligible for home loans, the home loan interest rate in India differs from one person to another. This difference emerges from differences in their profession, personal income, lifestyle choices, age, investment and so on.
Home loan interest rate:
- CIBIL score: This score is ascertained by a person’s credit and repayment history.
- Occupation and income level: A higher and assured monthly income helps to improve future income projections, making a person eligible for a home loan.
- Investment and savings patterns: Habits related to savings, hygiene maintained in timely payment of credit card dues and EMIs on past or existing loans, prudence in investments in risky vs non-risky assets affect housing loan quantum and home loan EMI due to differential interest rates.
- Applicant’s age and loan tenor: The age of the applicant is important in determining home loan interest rate. Above factors remaining favourable, a younger person’s rate of interest on their home loan is likely to be lower as compared to their older counterpart’s.
- The market value of the property in question: A home loan for a house built by a reputed builder makes for a better case towards home loan eligibility as the market value of the property determines its lucrativeness.
Understand how to reduce home loan EMI in India by negotiating for a lower rate of interest:
- The higher the CIBIL score, the lower is the rate of interest on the loan. CIBIL keeps a record of all PAN holders’ debts and repayments and assigns a score to each person accordingly. A higher CIBIL score of at least 700 indicates a low risk profile of an applicant to a lender, which subsequently means better odds of repayment of the loan principal plus interest. It can be achieved by being regular in credit card payments, and paying off EMIs on existing loans in time. This would help ensure a lower rate of interest on the home loan, reducing the home loan EMI burden on the individual.
The CIBIL score of the co-applicant of your home loan also determines the interest rate on it.It is a point worth remembering while applying for a home loan.
- The occupation of a person affects their home loan interest rate. For example, a person employed in an MNC or a government job is likely to have a lower rate of interest on their home loan. Than a person with erratic incomes like freelancers in media. The instability of one’s income (historic trends and projections), and riskiness of profession impact interests rate adversely.
- Consider diversifying your investments in favour of stable/less-risky choices as opposed to the riskier ones. For example, PPF, FD, debt funds are more stable options while equity is erratic. While investing in equity, choosing large-cap and mid-cap shares may help lower the interest rate on your home loan. The riskier your choice of investment, the higher is your home loan interest rate.
- Your age as an applicant is important. Assuming the above factors are favourably aligned for you. Your age would play an important role in determining your home loan interest rate. The younger you are, the lower your home loan interest rate. You will also get a longer tenor for the loan, helping ease your home loan EMI burden.
- Opting for a house built by a well-reputed builder with a history of completing his projects on time. That helps lenders feel more confident about sanctioning your home loan application. This also helps fetch a more attractive interest rate on it. Nowadays, RERA-approved projects are most liked by lenders. Ultimately help you get a better interest rate, lower EMI, and a more peaceful loan tenor.
Consider the above factors when trying to determine and negotiate your home loan interest rate in India.
