4 ways to get a low interest home loan

So the obvious question here is how the interest rate is derived and what can you do to get yourself the lowest rate possible.

CIBIL score of 750 or higher

Your credit score plays a crucial role in the interest rate you are offered on your home loan, or for that matter, any loan. It makes sense that lenders are comfortable giving funds to someone who is likely to repay the sum with interest and that too, in a timely manner.

Your credit report shows your credit history, highlighting your likelihood of repaying without default. A CIBIL score of 750 or higher presents a strong credit profile with a high chance of being offered favorable borrowing terms.

Make a large down payment

The RBI allows lenders to sanction up to 75-90% of the property’s value as a home loan, leaving you to take care of the remaining 10-25% of the property’s value yourself.

The interest rate offered to you depends mainly on the risk factor associated with your profile, i.e. whether there is a low or high risk associated with lending you funds. One of the factors that affects the element of risk here is the amount of the loan.

It is prudent to choose a loan amount that you can comfortably repay given your income and obligations. One of the ways to do this, apart of course from choosing a property within your budget, is to bear a higher share of the price of the property yourself. When you make a larger down payment, the loan amount decreases, as does the risk factor associated with your profile.

Transfer your mortgage

Existing borrowers also have the option of benefiting from a home loan balance transfer, in which you transfer the balance of your home loan to another lender for more favorable borrowing terms. Although you can renegotiate a number of the terms of your loan here, the main consideration is a lower interest rate.

Additionally, most lenders also offer you the option of a top-up loan when you transfer your home loan. For example, salaried and professional applicants can transfer their home loan to Bajaj Housing Finance Limited for interest rates starting at 7.35%* per annum and avail of an additional loan of Rs. 1 Cr* or more, depending on your eligibility. Note that the add-on loan is free from any end-use restrictions – you can use it for home renovations, business expansion, or any other financial need.

Make a large down payment

The RBI allows lenders to sanction up to 75-90% of the property’s value as a home loan, leaving you to take care of the remaining 10-25% of the property’s value yourself.

The interest rate offered to you depends mainly on the risk factor associated with your profile, i.e. whether there is a low or high risk associated with lending you funds. One of the factors that affects the element of risk here is the amount of the loan.

It is prudent to choose a loan amount that you can comfortably repay given your income and obligations. One of the ways to do this, apart of course from choosing a property within your budget, is to bear a higher share of the price of the property yourself. When you make a larger down payment, the loan amount decreases, as does the risk factor associated with your profile.

Add a co-applicant

Another way to enjoy a low rate home loan is to apply with a family member. When you add a co-applicant to your application, you share the burden of the home loan, improving your eligibility. For example, when applying with a co-applicant, you can show additional income and possibly a high credit score to improve your chances of approval.

Conclusion

Now that you know what factors can affect home loan interest rates, it is ideal that you apply once you have optimized your credit score and organized the funds. This way you get approval the first time.

Looking to apply today? Consider going with one of the leading lenders in the market today. Bajaj Housing Finance Limited, a wholly owned subsidiary of Bajaj Finance Limited, offers home loans from 7.20%* per annum for salaried and professional applicants.

*Terms and conditions of application

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