Today, applying for a Home Loan can make it possible for you to own your dream home. However, the affordability of the Loan depends on the equated monthly instalment. The EMI of your Home Loan is the amount you need to pay your lender every month to repay the Loan amount and the interest.

Thus, it is crucial that the EMI of your Home Loan fits comfortably into your monthly budget and does not strain it. While EMIs depend on various factors, the rate of interest offered on your Home Loan can be a crucial element influencing it. The interest rate is affected by multiple other factors. They are as follows:

Credit scores

Your credit score is a statement of your creditworthiness, repayment history, and financial discipline. This score significantly impacts your Home Loan interest rate. A lower credit score displays high credit risk. This causes banks to charge a higher rate to cover their risks. Conversely, a higher credit score portrays a lower credit risk. This allows lenders to be more willing to provide lower interest rates.

Job security

Having a stable job can be beneficial when applying for a Housing Loan. So, if you are a chartered accountant, doctor, etc., your bank may offer you lower Home Loan interest rates.

Loan amount

The amount you want to borrow can also impact the interest rate of your Home Loan. Banks may charge a higher interest rate on a larger Loan amount as it results in a more considerable risk to them. Thus, paying a higher amount as a down payment can be a good idea if you want to reduce the interest rate on your Home Loan.

Loan tenure

Loans with a shorter tenure result in a lower interest rate, even if you need to pay a higher equated monthly instalment. On the other hand, Loans with a longer tenure usually have a higher interest rate. You can rely on a Home Loan calculator to find a suitable tenure for your Loan based on your budget.

This online EMI calculator is easy to use and lets you compare various tenures to pick one that matches your repayment capacity.

Location of property

The location of the property you want to buy also affects the interest rates of a Housing Loan. Banks view homes with a good resale value as lucrative properties. Consequently, they may charge lower rates for them. For homes with a lower resale value, interest rates could be higher.

Conclusion

As evident, multiple factors can affect the interest rate of Home Loans, including the tenure of your Loan, the sum you wish to borrow, etc. Once you understand these, remember them. This helps you choose the best Home Loan depending on your requirements and budget.