Important Factors That Affects the Home Loan Interest Rates You Will Get

We all know how home loans are a long-term commitment which requires the borrower to pay their EMI over a longer period of time. Since the home loan is one of the high-value loans for salaried class people that bounds them in a loan agreement for a longer period of time, it is important to note the home loan interest rates all banks 2023 you are getting on your home loan. Most lenders allow for loan terms of up to 30 years. Irrespective of the loan tenure you choose at the end, the decision should be a well thought out and should only be taken out after careful financial planning. Home Loan Interest Rate today  are one of the most important factors influencing home loan affordability in the long run.

Why does Looking at Home loan Interesrt rates matter?

Home loan interest rates all banks 2023 have a direct impact on EMIs and the total cost of borrowing. Thus, it is imperative that borrowers must therefore gain a thorough understanding of the factors influencing home loan interest rates. A thorough understanding of these factors can assist in obtaining low-interest home loans

Important Factors Influencing Your Home Loan Interest Rates

  1. CIBIL Rating: Do you want to get a low-interest home loan? Check to see if your CIBIL score qualifies you for one. Your CIBIL score is a three-digit number that ranges from 300 to 900 and is used by lenders to assess your or borrower’s creditworthiness and repayment capacity. The higher one’s credit score, the better one’s chances of loan approval and obtaining a low-interest mortgage loan. What you can do is take a look at your credit report at least 6 months before you start the loan application process. This way, if your credit score is less than 750 which is apparently the minimum eligibility requirement set by most lenders, you will have plenty of time to improve your credit score.


  1. The Lender’s Base Rate: Banks must link their floating home loan interest rates to an external benchmark, according to Reserve Bank of India rules. The Repo Rate, 3-month or 6-month treasury bill rates, or any other rate published by the FBIL could serve as an external benchmark. HFCs, on the other hand, are not subject to the same regulations and typically tie their floating interest rate home loans to internal benchmark rates. As a result, your home loan interest rates and EMIs will change whenever the benchmark rate to which your home loan interest rate is linked changes. For example, if you have linked your home loan interest rate to the repo rate and are in the floating interest rate regime, your home loan interest rate will increase whenever the RBI raises the repo rate and vice versa. As a result, one deciding factor in selecting a lender is whether you want your home loan interest rates all banks 2023 to be linked to an internal or external benchmark.


  1. Interest Rate: Those considering a home loan should be aware of the home loan interest rates all banks 2023 regimes available to borrowers in India. Borrowers can choose between three interest rate regimes for their home loan: fixed, floating, and hybrid. Floating interest rates are commonly offered by lenders. When a person chooses a fixed-rate home loan, the interest rate and loan EMIs are unaffected by external market conditions and remain constant for the duration of the loan, or until the reset date. The interest rate on a floating home loan varies according to market conditions. Finally, in the case of hybrid housing loan interest rates, home loan EMIs are unaffected by external market conditions for the first few years, but the interest rate regime  eventually switches to the floating type.


  1. The LTV Ratio: The LTV ratio is the proportion of the loan amount to the market value of the property being pledged. For example, you want to buy an Rs.1 crore property and have arranged for an Rs.30 lakh down payment and intend to pay off the balance with a home loan. The LTV ratio in this case would be 70%. Borrowers should also be aware that the RBI has set a maximum LTV ratio limit for different loan amounts: for loans up to Rs.30 Lakh, the LTV ratio can be as high as 90%. The LTV ratio cannot exceed 80% for loans between Rs.30 Lakh and Rs.75 Lakh, and it cannot exceed 75% for loans above Rs.75 Lakh. While the LTV ratio has no direct impact on your home loan interest rates all banks 2023,, it is an important factor to consider. This is because the ratio defines the amount you can borrow as a home loan, which indirectly contributes to your application’s overall eligibility and risk factor.


  1. Income Security: Every lender wants to reduce the likelihood of loan default. One way lenders do this is by examining the borrower’s income and job stability. Individuals with salaried jobs and stable incomes receive the best loan offers from lenders. This is why people who work for reputable companies often have an easier time getting low-interest home loans than people who work for themselves.


  1. Property’s Geographical Location: The Home Loan Interest Rate today is also determined by the quality of the collateral. Lenders grant low-interest-rate mortgages on properties with high resale value. This is because the lender’s risk in such cases is significantly reduced due to the presence of high-value collateral. As a result, properties in central locations with modern amenities frequently command lower home loan interest rates. Similarly, new properties enable borrowers to obtain lower home loan rates than older and in poor-condition properties.


  1. Currently Owed Debt: Lenders also look at a borrower’s current debt situation to determine their ability to repay the loan. In other words, borrowers who are already servicing multiple loans and are burdened by multiple EMIs are viewed as risky by lenders, and as a result, lenders do not sanction low Home Loan Interest Rate today deals to such borrowers. Borrowers with fewer obligations, on the other hand, find it easier to obtain low Home Loan Interest Rate today deals. Ideally, those wanting to avail of a housing loan must keep their FOIR or fixed income-to-obligation ratio under 50-80%. In other words, only 50-80% of their total income should be used to pay off debt.

So we are saying,

If you want a low home loan interest rate, make sure to put the information in this article to good use. If you are looking for a partner to help you with your home loan, make sure to compare leading lenders in the market to get the best deal and the best borrowing terms.

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