How to Get a Home Loan at the Lowest Interest Rates?

Skyrocketing property prices have dampened the spirit of many first time homeowners to progress towards a purchase. However, a range of home loan products by SMFG Grihashakti on affordable interest rates has contributed to transforming your hopes of becoming a homeowner to actually becoming one.

Home Loan at Lowest Interest Rate

Is there any way to ensure that you get the lowest housing loan interest rate? Check out these tips that can help.

A Good Credit Score: This is one of the most important parameters that lenders look at when determining the rate of interest on your home loan. A score of 700 and above ensures that your lender will consider your application. A higher score establishes that you are a creditworthy candidate, meaning, the risk of defaulting on the loan repayment is minimum.

It denotes to the lender that you are a responsible borrower with a history of timely repayments. A CIBIL score of 800 and above many times helps prospective borrowers to negotiate a lower rate of interest on the home loan.

Must Read : 7 smart tips to improve your CIBIL score immediately

Offer a Bigger Down payment: When you apply for a home loan, lending partners like SMFG Grihashakti will not finance the entire amount required for you to purchase the property. You will have to contribute a certain percentage of the amount as a down payment. Depending on your eligibility, you may have to pay an amount of at least 10% of the property value, or more.

With some smart financial planning, you can save enough to go for a higher down payment on the home loan. This can be a way to get a home loan at the lowest interest rate ensuring that your interest component is less in the long run.

Check If You Pre-Qualify: All lending institutions have a system of monitoring their customer behaviour. This includes credit utilisation, payments made on credit cards, loan repayment history and more.

Customers that possess a track record of making payments on time are valuable to the lender. Hence, they are often rewarded with customised home loan offers. This is known as pre-qualification as the lending partner will require minimal documentation to process the loan as they are absolutely convinced of the borrower’s creditworthiness. This is one of the ways that can help you to reduce the home loan interest rate .

Shorter Repayment Tenure: Most home loans offer a repayment period ranging from 20 to 30 years. The actual period may vary from applicant to applicant as it is linked to the age of the borrower. Younger borrowers may be eligible to seek the maximum tenure whereas mature applicants may be offered a shorter repayment period.

Regardless of what period of time you may be eligible for, you can also choose to opt for a shorter tenure of home loan repayment. This is because a short tenure implies that the interest component will be paid for a lesser period of time.

Type of Interest: Home loans, like many financial products, offer two types of interest rates. Therefore, borrowers have the option to choose between a fixed or a floating rate of interest. While many may opt to go with the fixed interest rate as it offers more certainty, the floating rate of interest may prove to be a lesser financial burden as it is completely linked to the market.

What you end up choosing depends on your appetite to take on risks. If you go with the fixed type of interest rate, you will have limited flexibility in the future to reduce your monthly installments. On the other hand, a floating rate of interest can play a part in helping to reduce the home loan interest rate in the long run.

Home Loan Calculator: Many lending partners including Grihashkti offers prospective borrowers access to a free online tool called the Home Loan Calculator. Applicants are required to fill in simple information such as the loan amount required, period of repayment, income related details and their preferred rate of interest. The result generally is a near accurate estimate of the monthly instalment amount that will be due on the home if these parameters will actually be implemented in a real-world scenario.

While the tool on its own does not help you get the lowest housing loan interest rate you can play around with the numbers until you arrive at a figure that is financially comfortable for you and your family.

Compare Home Loan Offers: It will be unwise to accept the very first home loan offer that you come across. Instead, take time to research, list your requirements and expectations and align them with your financial capabilities.

Also, the lowest interest rate may not always be the best financial solution for you. It may be accompanied by various fees, terms and conditions that may not be at all financially viable for you in the long run. Therefore, it is best to compare offers from various lending partners before you progress towards making your formal application.

Make Pre-payments: Find out if your lending partner allows you to make bulk pre-payments. While you may have been obligated to go with a higher rate of interest at the time of availing the home loan, with a hike in income, you can make large chunks of pre-payments to reduce the home loan interest rate in the long run.

Large part payments also help you to minimise the principal amount and therefore, the interest levied automatically becomes less.

In Conclusion

No doubt, the process of home loan repayment is a lengthy process. If not planned properly, the financial burden can bring a lot of stress to you and your loved ones. Ensuring that you have the home loan at the lowest interest rate is definitely a way to minimise financial pressure.

Must Read : Tips To Make Home Buying Process Less overwhelming