Buying a property is a significant achievement since real estate prices can get very expensive. Most people apply for home loan plans in order to afford property purchases. Now, if you are planning on getting a home loan too, it is important to focus on getting a good deal. One of the most important factors to consider while applying for this loan is the housing loan interest rate. This rate is going to influence the monthly instalments of the home loan. This is why it is important to learn more about a home loan rate in order to get a home loan plan, which is affordable.
So, here is what you should know about a home loan interest rate:
- There are two different types of interest rates
While applying for a home loan, you can choose from two different types of interest rates. One is a fixed interest rate, and the other is a floating interest rate. A fixed interest rate is one that stays constant throughout the tenure of the home loan. On the other hand, a floating interest rate keeps fluctuating depending on the market changes. Floating home loan interest rates are generally slightly lower than fixed interest rates.
- Credit scores play an important role in getting a good interest rate
Any lender will check an applicant’s credit score before approving their loan application. But a credit score is not just important in deciding whether to approve or reject a loan application. For a borrower, a good credit score can have lenders offering a lower home loan interest rate too. Since financial institutions prefer borrowers with good credit scores (750 or more), they offer better deals including a higher loan amount and lower interest rate.
- It is possible to get a better interest rate by transferring the home loan
If you have already taken a home loan and now find a loan plan with better benefits, it is possible to opt for a home loan balance transfer. With this transfer, your existing housing loan is transferred from one lender to another. Most borrowers opt to transfer their home loans when the new lender is offering a lower home loan interest rate. While a slight change in the interest rate might not seem like much, it can actually have a significant impact on the monthly instalments of your home loan.
Now, do note that there are various factors that influence the interest rate of a home loan. Your job profile, the LTV (loan to value) ratio, as well as the loan amount are some factors that can affect the home loan rate. Make sure to keep this in mind while looking for a home loan. Also, it is advisable to make use of a home loan EMI calculator to understand the loan’s EMIs. If you are finding the monthly instalments to be out of budget, try to find a lender that is offering a lower home loan rate.