If you are eyeing the dream house you always wanted, this question is surely the first thing that comes to your mind. Let's check out these aspects that define the course of your home loan interest rate -

Is the Property in a Good Location? 

Property in an approved society has more chance of getting a loan amount up to 75-90% of the property value.

Do you have a Good Credit Score?

You must have a Credit Score of 750 or above to get approval for a home loan. The higher the credit score, the higher will be your chances of getting a low-interest rate.

Apply at the Bank where you have an Account

A good understanding with the bank will always help you in getting a high loan amount and that too at a competitive rate of interest on your home loan without any hassle.

High Income and Clubbing of Earning Applicants in Loan Application

A person earning a high income has good chances of getting a lower rate and a higher amount. In case you have more than one earning member, you can also apply for a home loan keeping that person as a co-applicant in your loan process. This will increase the overall income of your house and so you will get a high loan amount.

Keep all Property-related Documents

It is very important to maintain and keep all the property documents with you. As it helps the lender identify your property and its worth properly and thus trust your profile.

Make Sure you have Income Proof

Many people do not know that your loan application may be rejected. If you do not have income proof or a salary slip. Only a few NBFCs accept such cases but then they give high rates.

Apply at a Young Age

If your age at the time of applying is in your early 30s or late 20s. You are more eligible for a higher loan amount as you have fewer financial liabilities. Also, when you apply at a young age your loan tenure can go as far as 25-30 yrs resulting in smaller EMIs

Transfer your Home Loan to a Lower EMI

You can balance transfer your existing home loan to a lender offering a lower rate on your home loan to save your money.

Additional Info: Also check How to Apply for Pradhan Mantri Awas Yojana

Many borrowers think choosing a lower tenure for their home loan will allow them to spend less monthly and that's it. But, what they fail to realize is that by going for a longer tenure they are also increasing total interest outgo which when bended with the principal amount amounts to a considerably big sum than in a situation where your home loan tenure is lower.

Lets see this difference with a small example:

Case 1

Assuming you avail a loan of Rs 30 Lacs at an interest of 8.20% for a tenure of 20 yrs.

Case 2

You avail a home loan of Rs 30 Lacs at 8.20% for 15 yrs.

Comparison between both tenures clearly suggest that you are going to save around Rs 8,89,233 from your pocket.

Additional Info: Also Apply Section 80CCD

The six main factors that affect home loans apart from interest rates are explained below. These are just a few factors from the whole big list. It is important to consider each of these while applying for a home loan.

• Age isn’t Just a Number: The younger the applicant is, the more money will be sanctioned. Also, this increases the probability of getting the loan approved quickly. Though the maximum limit to apply for a loan for a salaried individual is 60 years, the tenure of the loan will be too less. Usually, for home loans, people look for a decent amount with at least 3- 5 years tenure.
• Earn a Sizeable Income: How much you earn will determine how much you can get. Bank will scrutinize every aspect of your income and expenditure to check what percentage of your income is available to repay the loan amount. For this, they need your salary slips, bank statements, employer authentication, and more.
• City: The place you live in will determine what should be your loan amount and EMI value. Living in expensive cities will help you gain larger loan amounts and vice versa. Cities like Mumbai and Delhi are considered Tier- 1 (expensive cities) and Agra and Meerut are Tier-2 (not so expensive cities).
• Credit Score: Apart from the applicant’s company performance, individual credit rating holds a lot of value. Having a good credit rating increases the probability of getting a loan with more flexible options on tenure, amount, EMI, and interest rates. In case of any default payment records, huge outstanding loans, or fraudulent track records, the bank has every right to cancel the loan or charge a higher interest rate.
• Existing Debts: Be smart to clear off your outstanding debts and expenditures before applying for a fresh loan. These outstanding loans will reduce the probability of getting the new loan sanctioned with hassles. Yes, it is not always possible to clear off all debts, but making regular payments without any defaults can make a difference in your life.
• Try Clubbing Incomes: Just like how too many sticks put together will be stronger than a single one, club income of different members in the family. It is possible to club your family member’s salary while applying for a home loan. However, clubbing the salary of an unmarried daughter is not allowed. Make use of the resource pool in the option to get better facilities and offers on the home loan application. Before approaching banks, sit back and decide how to club incomes and EMI payments within the family. It is also critical to ensure each person’s financial credit score is high enough to avail a loan.
• External benchmark lending rates: Since Oct 2019, floating rate home loans are linked to external benchmarks such as repo rate, yield on three-month or six-month treasury bills, or any other benchmark rate released by FBIL i.e. Financial Benchmarks India Pvt. Ltd. Based on this benchmark rate and customers’ risk premium the banks can transparently calculate effective rate of interest. With change in the benchmark rate, the effective rate will also fluctuate in a maximum of three months.

There could be a time in everyone’s life when you decide you are done living in a rented house. Home loans are always available as a great option for this decision and can lend hands during tax payments too. Though the amount paid by the bank has to be repaid, it is worth spending this money on a property that is expected to appreciate at all times. Investment in land or property is always a safe and smart move!

Additional Info: Looking for 50 Lakh Home Loan? Check EMI & Apply

Calculate Home Loan EMI using MyMoneyMantra Home Loan Calculator. It is simple, free and convenient to use EMI Calculator for estimating monthly installments. All you need to do is share the loan amount, tenure and rate of interest and the Calculator will instantly share EMI for your home loan.

Simple steps to calculate home loan EMI & interest amount are:

Step 1: Click on MyMoneyMantra Home Loan EMI Calculator.

Step 2: Share home loan amount, housing loan interest rates and tenure.

Step 3: Submit these loan parameters and instantly get Loan EMI & interest rate cost.

Completing these steps you will get:

• EMI
• Total interest payable
• Total amount payable
• Amortization Schedule for loan

Calculating your loan’s EMI is thus instant and hassle free at MyMoneyMantra Platform. Furthermore, you need not visit each bank’s website separately to know about loan terms or EMI calculations. You can try different combinations and choose the most affordable one according to your pocket.

You should also know about mathematical EMI Calculation:

Home Loan EMI Calculation Formula:

EMI= [P x R x (1+R) ^ N]/ [(1+R) ^ N-1]

Here, EMI is Equated Monthly Instalment

P is Principal Amount (Loan Amount)

R is effective rate of interest

Latest Home loan interest rate in all banks are calculated on an annual basis. To calculate monthly home loan rate, divide annual rate by 12

For example, if the applicable home loan interest rate is 8%, your monthly interest would be 0.0066 (0.08/12 = 0.0066)

N – Loan tenure in months (EMIs to be paid)

So, if it is a 15-year home loan, N = 15×12 = 180

Additional Info: Also check SBI Home Loan EMI Calculator

A home loan can be availed of as a fixed rate loan or a floating/ variable rate variant. However, currently maximum lenders in India are offering floating home loan schemes only.

• Fixed interest rate - As the name suggests, fixed interest rate of home loan results in fixed EMIs through the tenure. You can plan the budget for the entire tenure of the loan and thus there is no fear of escalating EMIs ever. However, this peace of mind comes at a higher cost than the floating rate interest. There is also a charge on foreclosure or prepayment of a fixed home loan.
• Floating/ variable Home Loan - In this, interest rate changes as per fluctuations in benchmark lending rates. With change in any of the external benchmarks such as Treasury Bill yields or repo rates, your bank will also change your home interest rates and thus your EMI will adjust accordingly. However, the variable rate of interest is lower than fixed interest and there are no foreclosure or prepayment charges.

Some banks also offer combination schemes wherein the loan switches to a floating rate after initial few years. Based on your current repayment capacity and market situation choose the loan regime

Additional Info: Also check Pan Number for Banks

You now know that you can avail two types of interest rates for your house loan. What is interesting to know is what are the charges levied by various banks when you try to transfer your home loan interest rate from fixed to floating or vice versa as banks can charge on the conversion. Check out the table below to know the conversion fee applicable to changing from a fixed rate to a floating rate.

Additional Info: Also Check Tax Benefit on Second Home Loan

Additional Info: Also check and Apply for SBI Plot Loan

To understand mathematics behind your home loan EMI you must understand the difference between Flat Rate and Reducing Balance Rate Calculations. Opting for reducing balance method can save your more money as against the flat rate, on the same interest rate home loan deal.

Additional Info: You can also Check AnyRoR Gujarat Land Record

How? Let’s understand with the help of an example:

In flat rate method, the interest on home loan is calculated on the loan principal amount each month and thus EMIs are same during the tenure of loan. However, on reducing balance method, the interest rate will reduce each month/ EMI cycle. The calculation for instalment is made on the balance amount of principal after deducting the repaid principal amount. So reducing rate method is more affordable than flat rate method for the borrowers.

Let’s say, Mr A takes a Home Loan of Rs. 10, 00,000 at 10% p.a. for 10 years.  Here is how interest rate calculations will vary:

Home loan is a long term commitment that runs for several years. Though maximum loan tenure range is usually up to 30 years, most borrowers take 10-15 years to pay their loans. The smaller is the tenure, smaller is your interest liability. Thus, one of the best ways to reduce your home loan interest rate burden is to opt for lower loan tenure.

Additional Info: You can also avail Canfin Home Loan

Use any of the following paths to keep burden of current home loan interest rates low:

• Prepay loan amount periodically: Your home loan EMIs are generally calculated on reducing balance method. So every time you repay your loan, the burden of interest reduces on the loan. One of the easiest ways to prepay your loan fast while keeping interest cost low, is pre-paying a fixed sum over & above the instalments at a fixed interval, say after 12 EMIs, each time. This will periodically cut down the loan principal and interest liability, thereby ensuring that your loan is repaid before the tenure. You can also schedule such payment with annual bonus, salary hike, business profits etc.
• Pay higher EMIs: Another method to get the lowest home loan interest rate bank offer is to pay higher EMIs each month. There is no penalty on home loan prepayment and thus prepaying EMIs helps you cut your loan burden.
• Balloon repayment: Continue with the scheduled EMIs & prepay the entire loan when you have surplus funds in hand.
• Opt for balance transfer: Besides prepayment you may also opt for a lower interest rate offer from another lender and apply for best home loan interest rates. This will entail a nominal fee in the process however you can considerably reduce the EMI & interest burden.

Additional Info: You can also avail Navi Home Loan