6 Smart Tips to Get Low Interest Home Loans
Are you ready to make one of the largest and most significant financial commitments of your life? Owning a home is not a cakewalk and comes with its own set of responsibilities like paying your EMIs every month without fail for many years, if not decades; planning your budget every month to accommodate your EMIs; making sure you make all your payments on time and in full every single month. One needs careful financial planning before taking the plunge. A house is a valuable, and usually appreciating, asset. In order to cater to the differing demands when buying a home, banks and NBFC’s have developed a variety of home loan options for you to choose from.
The market is flooded with home loan options and it can quite overwhelming to try and compare the various features and benefits on every offer. If you are seriously considering buying a home, here are some tips to keep in mind on what to keep in mind while shopping for low interest home loans:
Your credit score is the most important factor that will help to determine whether you qualify for a home loan and what rate you’ll pay on your loan. The higher your credit score, the lower your interest rate, and vice versa.
To land the best deal on a home loan, you need to make sure you have a healthy credit score. A credit score of 750 and above will increase your chances of getting a loan offer at attractive terms and interest rate.
As a rule of thumb, you will need to make a minimum deposit of 20 % of the purchase price of your home to get the best home loan interest rate. A loan with 10 % down payment is considered riskier than one with 20% deposit, and will carry a higher interest rate.
Concentrate on lowering your debt-to-income ratio. Your debt-to-income ratio is an important factor for having your loan application approved and availing the lowest interest rates. Debt-to-income ratio simply means the amount of debt ( loans, credit cards etc.) you have as compared to your overall income. Make larger payments towards your credit card bills, pay off the existing loan EMIs and then apply for a home loan.
Lenders generally prefer candidates who have a stable employment history and a consistent source of income. You stand a better chance of getting lower interest rates if the lender thinks you have a stable job with steady income for the tenure of the loan.
Don’t settle for the face value rate offered to you. Always negotiate; you might be surprised how much your monthly EMI outgo will be reduced after a bit of haggling. If the interest rate is not reduced, negotiate for better terms, like no penalty on closure, etc. Remember, the better your credit score, better the chances of having a reduced interest rate through negotiations.
Shop Around for The Best Deals:
This will help you negotiate better. If you know which lender is offering at what rates and on what repayment terms, then you stand a better chance at negotiating.
Here is a bonus tip: If you are an existing customer of a bank and have a good relationship with them, approach them first. As an existing customer, you might be eligible for preferential rates as compared to rates offered to the public.