Best Ways to Avail Home Loan at a Lower Interest Rate in 2021
With the RBI’s decision to keep the current repo rate unchanged at 4%, the home loan interest rates are at their lowest in 15 years. Regardless, borrowers can lower their housing loan interest rate in 2021 further by following a few financial tricks.
Check these tips below to gain an insight into how to lower interest rates -
- Improve Credit Score
A credit score serves as a numeric representation of an applicant’s repayment capacity. By increasing the same, one can improve the scope of securing credit at lower rates. The most effective ways of improving CIBIL score include repaying existing debt on time, maintaining a low credit utilisation ratio, and keeping old credit card accounts active.
- Make a Higher Down Payment
Making a down payment higher than 20% of the property individuals’ cost can lower their required housing loan quantum. Resultantly, a low principal amount will attract lower rates of interest.
- Pick a Short Loan Tenor
Most financial institutions consider a long-term loan riskier than a short-term loan in terms of default. Consequently, they levy a higher rate on housing loans when a longer repayment tenor is involved. Thus, by picking a shorter tenor, borrowers can save more on their home loan rates successfully.
- Maintaining a Low FOIR
Individuals who have a FOIR of less than 50% not just meet the home loan eligibility criteria but also qualify to secure a loan at a lower interest rate.
Existing borrowers can lower their interest burden by switching their loan to a new lender who offers lower rates. Also, by claiming applicable home loan tax benefits borrowers can reduce their loan burden.
Keep in mind that exact home loan EMI or interest outgo is dependent on several factors, including one’s eligibility along with external determinants, such as repo rate.
