2 min read
25 May 2021

If you are applying for a home loan, ensure the EMIs don’t eat into your monthly savings. One way of doing that is by getting yourself a competitive interest rate. While you do your research, we have a few tips that will help you negotiate a good home loan deal.

Improve your CIBIL score

The higher your CIBIL score, the lower your home loan interest rate, other things being equal. The best home loan interest rates are available to borrowers with credit scores of 750 or above (900 being the highest). As your score reduces, the interest rate goes up. If you want to improve your chances of getting a better interest rate, you will have to monitor your CIBIL score and make improvements where necessary. Try:

  1. Clearing debts
  2. Paying credit card dues
  3. Rectifying errors on your credit report

Make a higher down payment

Make a large down payment so that you can go for a lower principal amount when applying for a home loan. Lenders calculate your home loan interest on the principal amount - the smaller your principal, the lower the interest rate and, thus, your EMI. As a general rule, you need to pay a minimum of 20% of the purchase price of your home as a down payment to get better home loan interest rates.

Opt for a longer tenure

If your principal amount and home loan interest rate are divided over a greater number of months, you will end up with smaller EMIs. However, you will end up paying the EMI for a longer period, which means you will pay more interest on the home loan.

Negotiate with the lender

You can ask a lender for a lower home loan interest rate if you are an old customer and have been in the lender’s good books. If you have been making your loan repayments with the lender on time, they might consider offering you a better interest rate.

Additional Read: Three simple steps for effective home loan management

Ensure employment stability

Home loan lenders prefer borrowers who have been in steady employment for at least two consecutive years. If you have been unemployed for long or switched jobs often, it might be difficult for you to get a good interest rate on your home loan. A pattern of declining income will also fetch you a higher interest rate.

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