Stay Updated with The Latest Home Loan Interest Rates Revealed
Loans are of two types: secured and unsecured. Secured loans are backed by a collateral which the lender can sell for loan recovery if the loan borrower defaults on loan repayment. Home loans are a type of secured loan — the house bought with the loan money serves as collateral in the case of these loans. The biggest benefit associated with secured loans is that they draw a low rate of interest and home loans are the cheapest of all loans. Therefore, it is not surprising that most homebuyers avail of a home loan to fund property purchase and therefore, the home loan market is expected to grow at a CAGR of 15% per annum.
The home loan interest rates that one gets offered determine the affordability of the loan. In a utopian society, everyone would be offered the same home loan rate of interest. However, that is not the case. Lenders decide the current home loan interest rates to be offered to a borrower based solely on the risk they pose as a client. Lenders use a set of home loan eligibility criteria to assess this risk. We will get to the factors that affect home loan eligibility and the home loan interest rates that one gets offered later in this article.
For now, borrowers must know that the latest home loan interest rates vary between 8.50% and 12%. In the aftermath of the Covid-19 pandemic, the RBI had reduced the Repo Rate considerably, which had led to home loans becoming cheaper. However, the economy has revived now and the real estate sector is doing specially way. The RBI has, therefore, been slowly increasing the Repo Rate, which has led to home loans becoming slightly expensive than they had been two years ago. In any case, latest home loan interest rates are still quite low and affordable. Current home loan interest rates range between 8.50% and 12%. Borrowers are advised the use of a home loan eligibility calculator to figure out the loan amount they can borrow based on their income.
Let us now look at the factors that affect home loan interest rates that one gets offered.
Factors That Affect Home Loan Eligibility
1. Credit Score
An individual’s credit score is one of the key factors that determines the home loan interest rate they get offered. The credit score is a three-digit number between 300 and 900 that indicates a borrower’s ability to repay their loan on time. The credit score is calculated based on a borrower’s past repayment history, credit utilization ratio, dependency on credit and the age of their credit score. A high credit score, i.e. anything above 750 indicates high creditworthiness and repayment capacity and therefore, borrowers with a high credit score get offered the lowest home loan interest rates. A low credit score, on the other hand, leads to lenders extending loan offers on high home loan interest rates.
2. Loan Tenor
Long tenor loans pose higher risk for lenders and therefore, lenders charge a higher rate of interest in the case of long-tenor loans. Short-tenor loans, on the other hand, draw a lower rate of interest.
3. Down Payment
The down payment that a home loan borrower makes ensures the borrower has some equity in the home they are buying. The higher the down payment, the higher the borrower’s equity in the home and the lower their chances of defaulting on loan repayment. Thus, when borrowers pay a higher down payment than is required, which is normally 20% to 30% of the home’s value, they get offered lower home loan interest rates.
4. Income and Job Stability and Age
Lastly, borrowers in a stable job are less likely to default on loan repayment than borrowers who switch jobs often. Thus, lenders also extend their best home loan offers to people with stable jobs. Further, lenders also understand that young borrowers have more working years ahead of them and therefore, are less likely to default on loan repayment. Therefore, young borrowers, i.e. those in their late 20s and early 30s often get offered the lowest home loan interest rates.
Final Words
If you are planning to avail of a home loan any time soon, here are a few things you must keep in mind. To start with, use a home loan eligibility calculator to figure out the loan amount you qualify for and apply for this amount or something lower to enhance your chances of loan approval. Also use a home loan EMI calculator to understand what is the loan amount and EMI you can comfortably afford to repay. Borrow what you can repay so that loan repayment does not become burdensome. Further, before deciding the loan amount, use a stamp duty calculator to understand what is the stamp duty and registration charges you will be required to pay. The registration fee and stamp duty inevitably turns out to be hefty amount and therefore, most borrowers include this amount in the loan amount to reduce their immediate burden.
If you are looking for a home loan partner, choose Bajaj Housing Finance. Bajaj Housing Finance offers home loans at interest rates starting as low as 8.60%* per annum. Borrowers also get the option to repay their loan over a period extending up to 30 years and can manage their loan account at any time and from any where using the Bajaj home loan login and customer portal. Bajaj Housing Finance offers home loans up to Rs.5 Crore or higher, basis eligibility. The NBFC is one of the most trusted NBFCs in the market today and it’s customer-centric approach has helped it win millions of customers. So, apply with them today to experience a completely hassle-free process.
