Do you have a dream of owning your home or transforming your home into an aesthetically pleasing space, and don’t know how to arrange finances? If yes, then worry not. A housing loan is the best solution that can help you make your dream come true.
A housing loan refers to a loan type where you can borrow the required amount from financial institutions either to buy a new home or renovate an existing one. The property itself serves as a security for the loan, allowing the lender to secure the loan against the value of the home. Housing loans help you to finance the purchase of a house by spreading the cost over an extended period while gaining homeownership.
One crucial factor that impacts the borrowing cost is the housing loan interest rate. These rates may fluctuate depending on factors such as subsequent monthly payment modifications and overall affordability. This guide will help you explore details regarding the housing loan interest rates.
Types of Interest Rates on Housing Loans
Interest rates on housing loans can vary based on several factors, including the type of loan, the lender, prevailing market conditions, and the borrower’s creditworthiness. Here are some common types of interest rates you might encounter when seeking a housing loan:
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Fixed Interest Rate
The interest rate on a housing loan remains constant during the loan’s term. Thus, there are no fluctuations in the interest charges over time. You have the correct knowledge of the interest charges upfront. This shields the loan from frequent rate fluctuations, providing stability. In case of an increase in lending rates, you can simply save money in the long term.
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Floating Interest Rate
The interest charges on the home loan are directly associated with the bank’s current lending rates. It is linked to the latest published rate, which depends on factors like RBI’s monetary policy, lending rate revisions, and the bank’s response. Opting for a floating rate provides the advantage of being billed based on the most recent interest rates. If lending rates decrease, you can save a lot on interest charges.
Factors Affecting Housing Loan Interest Rate
Interest rates on housing loans are not fixed and can vary from time to time. Numerous factors, including economic indicators, national policies, inflation rates, and the state of the housing market influence them. As a result, these rates can change frequently, sometimes even daily.
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Change in Policies
In order to control the problem of extreme inflation or deflation, central banks often adjust the interest rates. So, when the economy is booming, central banks may increase interest rates to prevent excessive borrowing, curb inflation, and cool down the housing market.
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Economic Indicators
Apart from central bank policies, economic indicators such as GDP growth, unemployment rates, and consumer price indices also influence housing loan interest rates. Lenders analyse these indicators to assess the level of risk in the economy and adjust their lending rates accordingly. For instance, if the economy is performing well, with high employment rates and consumer spending, lenders may be more willing to offer lower interest rates to attract borrowers.
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Housing Market
Lenders can think about decreasing interest rates to encourage home purchases and boost the market if there is a big demand for houses. In the same manner, lower demand could result in higher housing loan interest rates as a way to offset possible losses or hazards.
Tips to Get a Favourable Housing Loan Interest Rate
When applying for a housing loan, checking the eligibility criteria and the housing loan interest rate is essential. Here are some tips to get a favourable housing loan interest rate.
- You must research numerous lenders available in the market to get the best interest rate. Doing thorough research on interest rates, terms, and fees will help to identify the most competitive offer available in the market.
- Maintaining a high credit score is crucial, as lenders usually consider this parameter to determine your ability to repay the loan amount. If you have a credit score of more than 650, the lender will charge a comparatively low housing loan interest rate since you will be deemed a reliable borrower.
- Lenders generally prefer applicants with stable employment due to higher job certainty and income. Therefore, ensure a stable income source before applying for the loan amount.
- Lenders usually assess the debt-to-income ratio to determine your repayment capacity. A lower ratio can enhance your eligibility for a better interest rate.
- Furthermore, seeking advice from financial experts or loan brokers is advisable. They can provide insights into market conditions and help streamline the loan application process.
Apply From the Best Lender!
To get the best and most competitive housing loan interest rate, it is advisable to apply for a loan from a reliable lender. Tata Capital is one of the best NBFCs in India that offers easy and hassle-free housing loans at interest rates starting from just 8.70% per annum.
They are transparent about all the charges and terms, ranging from home loan prepayment charges to the processing charges for home loans to MODT charges. The flexibility to choose your loan amount and repayment tenure makes Tata Capital the best NBFC.
