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Securing Your Home: Lowest Home Loan Interest Rates Revealed

Home loan borrowers repay their loans in the form of home loan EMIs. Each EMI constitutes a principal component and an interest component. The home loan interest rate that one gets directly affects the interest component of one’s home loan. A high interest rate causes the interest component of the home loan to go up and therefore, also an individual’s overall EMIs.

Lenders decide the housing loan interest rate to be offered to a loan applicant after taking into consideration a variety of factors, such as the loan applicant’s income, age, credit score, debt-to-income the LTV ratio they had opted for, etc. Having an understanding of the factors that affect home loan interest rates allows one to enhance one’s ability to demand lower interest rates. This article discusses a few simple tricks that home loan applicants can employ to establish their eligibility for the lowest home loan interest rates possible.

Securing Your Home: Lowest Home Loan Interest Rates Revealed

Current home loan interest rates start as low as 8% per annum and can go up to 14% per annum. Here are some simple tricks that one can employ to establish candidature for the lowest home loan interest rates.

  1. To secure a low home loan interest rate, one of the first things that borrowers can do is shop for interest rates. In other words, reaching out to different lenders and negotiating with them for low interest rates will help you win a better home loan deal along with low home loan interest rates.
  2. For secured loans, such as home loans, the LTV ratio plays a vital role in determining the home loan interest rate to be offered to a borrower. A high LTV ratio implies higher chances of loan default and therefore, high LTV ratio loans often attract a higher rate of interest. Those planning to avail of a home loan must save as much for the down payment as possible and opt for a low LTV ratio loan to benefit from low home loan interest rates.
  3. Securing a low rate of interest on a housing loan becomes easy when your debt-to-income ratio is low. A high debt-to-income ratio implies that you are already devoting a significant portion of your income towards covering debt. Thus, lenders have every reason to doubt the repayment capacity of individuals who have a high debt-to-income ratio. Such individuals are therefore extended loans on high interest rates. A low debt-to-income ratio, on the contrary, can make one eligible for better home loan interest rates.
  4. Home loan eligibility is an important parameter that lenders take into account while deciding the home loan interest rate to be offered to a borrower. Individuals who ask for loan values in line with their home loan eligibility stand a better chance to avail of home loans at lower interest rates. On the contrary, individuals who request loan values much higher than they are eligible for often find themselves accepting loans on disadvantageous loan terms and conditions, including high home loan interest rates.
  5. Lastly, home loan borrowers can also benefit from a home loan balance transfer. Home loan balance transfer is a facility that existing home loan borrowers can utilize to transfer the remaining balance on their current home loan from their current lender for a lower rate of interest or other beneficial loan terms and conditions. However, one must opt for a home loan balance transfer only after carefully weighing all the pros and cons.

A home loan is a long-term commitment, one that is likely to go on for at least a few decades. Therefore, loan applicants must apply for housing finance after careful planning. Online tools, such as the home loan calculator and home loan eligibility calculator, make home loan repayment planning easier. Therefore, one must get well-versed with these tools and use them frequently.

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