Top Factors That Affect Your Home Loan Interest Rate


Several lending institutions offer favourable terms and conditions, along with competitive interest rates for a housing loan in India. As a borrower, your focus will be on getting the best home loan interest rate for increased affordability, along with other attractive loan features to cater to your income and repayment capability. To that effect, you can use the home loan EMI calculator available on the lenders’ websites, to calculate your monthly payments.

As of now, it is estimated that the Compound Annual Growth Rate (CARG) for the housing loan sector will grow to 22% between 2021 and 2026. As more and more Indians look towards buying a home, since owning a home is a milestone in life, it is smart to understand the key aspects to reduce the interest rate for your housing loan in India. Read on to know what they are.  

Having a good credit score

Your credit rating is a measure of the risk you pose to the lenders and your borrowing habits and repayment behaviour is highlighted by your credit score. Most lenders prefer a CIBIL score of 750 and above as it reassures them of your creditworthiness, and that you will not default on payments. This helps you get a more competitive home loan interest rate. 


Displaying financial stability

To get low home loan interest rate, you must have a stable and consistent income. If you are a salaried professional, then working continuously for three or more years is crucial for a low interest rate. Similarly, as a self-employed individual, you will have to prove that your business has been operational for five years or more. The lending institutions simply wish to reassure themselves that their loans will be paid in full without defaulting. 


Having a good property location and other amenities

The location of the property is extremely important as a property in a prime area is likely to get you a lower home loan interest rate. Likewise, if your property is in the suburbs, with connectivity issues and with only a few amenities nearby, then the interest rate will be higher to offset the risk of a lower resale value. 


Choosing a lower loan to value ratio

The loan to value ratio is calculated as per the loan amount offered versus the current market value of the property. The market value of the property depends on its age, condition, usable space, size, and location. A higher LTV usually results in a higher home loan interest rate. You can bring down the LTV by making a larger down payment while taking the loan. A lower LTV also increases your home loan eligibility, offering you higher chances of approval on your home loan application. 


Selecting a shorter repayment tenor

The loan tenor affects your home loan interest rate and your monthly payments. Lenders prefer shorter repayment tenor, as it means that the loan will be paid in full sooner and with higher monthly payments. You as a borrower, will, therefore, have a lower rate of interest for your loan. With a longer repayment tenor, you pay lower EMIs, but a higher rate of interest, as it takes longer for the loan amount to be paid in full. Use the home loan EMI calculator to select the right tenor for your loan. 

You can now make a smart choice with improved knowledge about the factors that impact your home loan interest rate. While several banks and financial institutions offer attractive home loan terms and conditions, the Bajaj Housing Finance Limited Home Loan is a top choice amongst borrowers. With easy-to-meet home loan eligibility parameters, nominal interest rates, and a top-up loan feature, you can rest assured that you are getting the best deal as a homeowner. You can also get all legal and financial aspects covered with the handy property dossier to make your home buying experience better. Opt for a hassle-free application and apply online by filling out the simple form!