Housing Loan Rates Offered by Different Lenders

It might be your dream to buy or construct your own house for your family. To fulfill this dream, it is important that you take a Home Loan. But there are different rates of interest on a Home Loan. Also, these interest rates vary with situations and circumstances.

Let us have a look at some of the key factors that can influence interest rates on your Home Loan:

Type of Property - Banks categorize properties on the basis of use and risk levels. If you are planning to buy a home for yourself and your family, then you will be charged the lowest Home Loan interest rate. But if you are buying a house for vacation purposes, then the bank will charge you a high rate of interest.

Loan Amount - Loan amount is available from the bank as the borrowed money. When the price of your house that you are planning to buy, is higher than the down payment, the excess money is the loan amount. If you apply for an exceptionally small amount or a highly large amount, then the bank will charge a high rate of interest on the loan.

CIBIL Score - It is a tool to measure the creditworthiness of an individual. It is calculated from your credit report. It shows your credit history with regard to loan repayment and credit card payments in a timely manner. If you pay your loan EMI s and credit card bills on a regular basis, your credit score will be high. A high credit score can help you attract a lower rate of interest on your Home Loan. But, if your credit score is low, it shows your low reliability in repaying your loans and bills.

Loan Tenor - It is the duration you get from the bank to repay off your loan. If you take a loan for a short period of time, then the bank will charge a lower rate of interest and vice versa. Longer the duration, higher will be the rate of interest.

Down-payment Amount - The amount of down-payment plays an important role in determining the housing loan interest rate. Larger the down-payment amount, lower will be the LTV ratio. Loan to Value (LTV) is the money that you receive from the bank against your application of loan. If you pay a small amount as down-payment, then the LTV ratio will be higher and the bank will charge a high rate of interest.

Type of Interest Rates - There are two types of interest rates- fixed and floating. Fixed interest rate remains fixed over the entire tenor of the loan irrespective of market conditions. Floating interest rate changes with the changing market conditions. When compared, floating interest rates are found to be cheaper than fixed interest rates.

The Bottom Line

Interest rates play a crucial role in applying for a Housing Loan. So it is advisable to check the interest rate and its impact on the Home Loan.

While choosing a Home Loan, it is important to focus on the interest rates on Home Loans.

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