Borrowers should possess a thorough knowledge of the key factors influencing home loan interest rates in India before applying for this credit option.
Thanks to the easy availability of home loans, people can now fulfil their dreams of owning a home. Furthermore, the high-value loan amount and the competitive home loan interest rates have made this credit facility popular among homebuyers in India.
The monthly instalments and borrowing costs are significantly impacted by interest rates. Therefore, borrowers should possess a thorough knowledge of the key factors influencing home loan interest rates in India before applying for this credit option.
How Do Financial Institutions Determine the Home Loan Interest Rates
Lending institutions consider the following factors while determining the home loan interest rates for a particular borrower:
Location of the property
The property’s location also impacts the interest rates on a home loan. If a property is located in a posh location with amenities, such as railway stations, grocery shops, hospitals, schools, etc., in proximity, it will have a high resale value.
Consequently, financial institutions will charge a lower interest rate for such properties. On the other hand, choosing a property in an area with poor facilities will result in a higher interest rate.
Income stability of a borrower
The interest rates charged by any financial institution depend heavily on a borrower’s income status. Lenders favour borrowers with a stable source of income. Therefore, salaried people are given lower interest rates because their steady income indicates the ability to pay back loans on time.
Loan quantum
Borrowers should give equal weightage to loan principal. High loan amount will increase home loan EMI burden for a borrower, thus increasing the risks of credit defaults. Hence, financial institution charges a higher interest rate for a greater loan amount.
Borrowers must make sure to pay a sizable down payment if they require a sizable loan principal. A sizable down payment will lower the loan balance, resulting in a lower home loan interest rate.
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