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Decoding Ways to Procure Best Home Loan Rates

Blox Social
Posted on
Oct 19, 2023

Owning a home is a dream come true for most people and families. While a down payment is required for purchasing a home, a home loan also has to be arranged for covering the majority of the purchase cost. Availing a home loan may seem a complex procedure, although most banks and financial institutions have transformed their application and verification procedures, enabling better experiences for customers in turn. 

The key thing to note here is that a home loan is usually a long-term proposition that spans 15-20 years or even more. Hence, obtaining the best home loan rates is crucial towards keeping the monthly repayment amount or EMI (equated monthly installment) in check. It also helps in streamlining and lowering the overall outgo or cost of the loan. Here is a brief guide towards obtaining the lowest possible home loan interest rates. 

Lower Interest Rates on Home Loans- How Do You Get Them? 

Here are a few steps that will help you obtain the best home loan rates for maximum convenience and affordability alike. 

  • Choose a smaller tenure- Most banks offer lower rates of interest for borrowers who choose smaller repayment tenures. Longer tenures will lower your monthly EMI although the interest will be higher as well. 
  • Make a higher down payment- The more you pay upfront, the lower the cost of your home loan. It may also help you get a more favourable interest rate from the lender. 
  • Compare interest rates carefully- Before applying for a home loan, compare interest rates across multiple banks and financial institutions along with their terms and conditions. This will help you zero in on the institution that can offer you the best home loan rates for your chosen amount. 
  • Home loan balance transfers- If you already have a home loan and feel like you are paying a higher rate of interest, you can always transfer the remainder of your loan to another institution with a lower interest rate. This may help you get a better deal in some cases. Check whether your total loan cost comes down and make the move only after verifying this aspect. 
  • Maintain a good credit score- Banks and financial institutions scrutinise several factors closely before approving home loans for borrowers. One of these key elements is the credit score. You should maintain a credit score that is as close to 900 as possible. Scores of 750 and upwards are more likely to obtain lower and better rates of interest. Poor credit scores may lead to higher rates of interest being offered by the lender. 
  • Prepayments may also be helpful- Regular prepayments may help you get lower interest rates, particularly if you execute them whenever there is an increase in your income or you get a financial bonus. Interest rates are likely to fall when the principal amount of the home loan comes down. 
  • EMI revisions- If you start earning higher and can afford to pay more every month, get your home loan EMI revised. This will automatically cut down the loan tenure and amount along with the rate of interest. 
  • Consider floating interest rates- Floating interest rates are calculated as per the changes in the repo/benchmark rates along with other market movements. These interest rates are slightly lower than fixed interest rates, although they are subject to fluctuations. While there are risks of them increasing, in a downward rate cycle, you can opt for them to pay less overall. 

Signing Off 

These are some tips that you need to following order to get a lower rate of interest. If you have a stable income and meet the bank/financial institution’s eligibility criteria, then you can always expect to get your chosen amount sanctioned with a better interest rate. Keeping your credit score high is a must along with clearing off as much existing debt as possible before you apply for the home loan. 

Banks prefer customers with a good credit score and track record of financial discipline along with those who have repaid their dues in a timely manner. They also prefer those who can easily repay the home loan over a shorter tenure with a stable source of income and assets. Hence, if you stick by these principles, then it will be possible for you to get the best home loan rates without any difficulties.

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