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Factors that can affect your Home Loan Interest Rate

  • Highlights

  • Maintain a good credit score for a low interest rate

  • Check if your home loan’s interest is linked to MCLR

  • Select a recently-built home in a good location

  • Take a loan from a lender with nominal rates

The affordability of your home loan hinges on the interest rate. This interest rate varies from lender to lender. While some factors that decide the home loan interest rate are out of your control, there are others that you can control.

Take a Look at the Factors That Affects your Home loan Interest Rate.

Your credit score:

Your credit score has a major impact on the interest rate that you have to pay. It is a measure of your creditworthiness and impacts the lender’s faith in your ability to repay a loan. While a poor score can cause the lender to charge you a higher rate of interest, a high score gives you the upper hand. As a result, you have some breathing room to negotiate and bring down the rate of interest. Raise finance to buy your dream home, with a Bajaj Finserv Home Loan. Here you can gain from a nominal rate of interest, property search services, top-up loan, quick approvals and easy application.

Prevailing MCLR rates :

MCLR is a benchmark lending rate at which lenders give loans. Earlier, financial institutions relied on the base rate to do this. These loans come with a reset clause, at pre-determined intervals, which can be six months or 12 months. At this period, any changes in the MCLR will result in a change your interest rate. This means that your interest rate will marginally increase and decrease through the tenor. But, it ensures that you don’t end up overspending by adhering to a fixed, high rate of interest.

Additional Read: All You Need To Know About MCLR Based Home Loans

Fixed or Floating Interest Rate | Which is Ideal for your Home Loan?

The location and value of your home:

The location plays a major part in determining the value of your home. For example, a home with good amenities in the vicinity like shopping centres, grocery stores, bus stops, railway stations, banks, hospitals and schools are likely to have a higher value than a home with poor amenities and connectivity. If you choose a home in a location with poor amenities, it reduces the value of the home in the eyes of the lender, as resale will be difficult. The same applies to the age of the property. Newer properties are more lucrative as they are considered to be more stable. So, if the property you are buying is old and not in an upcoming neighbourhood, you will have to pay a higher rate of interest, and vice-versa.

Suggested Additional Read: How to Reduce Home Loan Interest Rate?

Paying attention to these factors will help you understand your home loan interest rate better, so that you can pick one that is truly affordable. Do your research on lenders as well to choose the most nominal interest that supports comfortable repayment.

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