5 smart tips for getting a low interest rate on a home loan
While getting a home loan is relatively easy in this age of technology, finding a lender who offers you a loan at a low interest rate can often be tricky. Although lenders offer attractive rates, it takes extra effort to negotiate suitable loan terms.
Overall, your eligibility for a home loan and your financial situation play an important role in choosing the interest rate you are offered, and you should pay close attention to these factors before you apply. Take a look at the financial tips below to get the lowest possible mortgage interest rate.
Maintain a good credit rating
Real estate lenders are looking for candidates who are a sure bet. With this in mind, they only grant loans after having assessed the borrower’s risk profile and financial situation. For example, borrowers with a credit score closer to the 750 mark get their mortgage approved easily because lenders consider them creditworthy. Additionally, those with high scores are usually offered concessional mortgage interest rates.
That is why you should try to maintain a CIBIL score of 750 before applying. If you don’t meet this requirement, work on improving it until you do. You can improve your credit score by paying off your past debts or any other overdue IMEs, correcting errors in your credit report, or simply maintaining a healthy credit usage rate. This will improve your mortgage eligibility and help you get approved for a lower interest rate.
Pay a higher deposit
The LTV ratio is a crucial part of the home loan process. Typically, you should finance around 15-20% of the home’s value through a down payment, but you can always invest more. By doing this, you effectively reduce the loan amount which reduces the risk to the lender. Borrowing a lower loan amount translates into good financial responsibility, and the lender may be willing to offer you a lower mortgage interest rate as a result.
Negotiate for better conditions
Maintaining a good financial relationship with your lender will allow you to negotiate a better interest rate for your home loan and other features. For this you need to prove a consistent loan repayment history, stable income, and a healthy bank balance.
Lenders are even considering other sources of income, such as rent collected from another property, among others. All of these factors underline your financial stability and help prove your ability to repay the loan on time. A solid profile ultimately helps you to negotiate better on favorable terms.
Consider a balance transfer
The balance transfer facility only works if you are already a mortgage borrower. If you think your lender is charging you more or if you find a new lender who offers you a better mortgage interest rate, then it may be a good idea to consider refinancing. Note that there are fees involved while performing a balance transfer. Do a thorough cost-benefit analysis and only go ahead if the interest savings outweigh the cost of the transfer.
Select a long tenor
Some lenders may offer a lower home loan interest rate to borrowers who opt for a long term. Indeed, a mortgage is a long-term instrument and opting for a longer duration helps to keep the IMEs manageable. In the eyes of the lender, comfortable IMEs translate to lower risk, which is why they can offer a better rate. To find the best option for you, use a home loan interest calculator. It shows you the interest payable on the principal amount at the interest rate and term you choose.
Follow these financial tips and enjoy good financial preparation to get the best mortgage deal. However, just getting a low interest rate is not enough. You should also have access to a range of loan features. One option that does both is the Bajaj Housing Finance Limited home loan.
This instrument offers you an amply sufficient sanction and a flexible term of up to 30 years, all at an attractive mortgage interest rate. It is also easy to use as you only need to meet some simple criteria and provide some basic documentation. Other notable loan features include the ability to qualify for a high value add-on loan while transferring your loan, and the ability to apply online and get a sanction letter within minutes. To access all these benefits and more, apply online and get hassle-free approval.