With real estate prices being so expensive, owning a house is truly considered to be a significant achievement. Most people can only afford to buy houses by relying on home loans for financial support. Do note that home loans only cover about 80-90% of the cost of the property and the remaining has to be covered as a down payment. This is still considered to be a huge cover as the loan helps most people avoid depleting their savings.
Now, there is a lot to think about before you apply for home loan. It is very important to make sure that the loan plan is affordable and can be repaid without any financial complications. This is where focusing on the home loan rate is essential as it can have a significant impact on the loan’s monthly instalments. The home loan rate is based on various factors that you need to keep in mind in order to get a good deal on the loan. These include:
- Making a higher down payment
Making a higher down payment is one of the most effective ways of lowering the interest rate of your housing loan. What most borrowers do is try and get the lender to cover most of the property cost in order to give the minimum down payment. However, in this case, the lender might charge a higher interest rate since they are lending a bigger loan amount, thus increasing their risk.
- Choosing a short repayment tenure
The repayment tenure you choose can also have an effect on the interest rate of the loan. Most lenders offer a maximum of 20 years to repay a home loan, and borrowers choose the maximum tenure to keep the EMIs at a minimum. However, if you are looking to save money on the interest, it is advisable to choose a short repayment tenure. By cutting down the number of EMIs, you are not letting the interest payments add up by repaying the entire loan in fewer instalments. Before taking this decision, make use of a home loan calculator to find a convenient tenure to repay the loan.
- Increasing EMI payments
As you grow in your professional career, your salary will increase too. Now, this will improve your repayment capacity, which then makes it possible to increase the EMI payments of the home loan. Many lenders permit borrowers to revise the EMIs every year. Therefore, this will give you a chance to increase the EMI payments annually and doing this can help repay the loan faster in fewer monthly instalments, thereby cutting down the interest.
These are some factors that influence the home loan interest rate. Also, if you have already taken a loan and are looking to get a lower interest rate, consider opting for a home loan balance transfer. This involves getting your current loan plan transferred to a new lender for better benefits such as a lower interest rate.