Taking a home loan? Know all about housing loan interest rates

Home buying is a big investment, we check the local amenities, vicinity, property price, land papers, etc. before we zero in on particular builder or property. However, due to rising inflation costs and other financial commitments, it's nearly impossible for people to buy a home by fully dealing in cash. Therefore, a home loan is the best option in today's era one can opt for while buying a house. These home loans are specifically customized as per the needs of the individuals by leading banks and non-banking finance institutes.

Of the various factors to determine your loan eligibility, home loan interest rates play the crux role. It is the decisive factor based on which you can determine the loan amount eligibility and your monthly installment. Today, leading banks and finance companies are offering home loans with interest rates as low as 9 to 10% with a nominal processing fee of around 1-2% which is a big boost in the real estate segment.  Basically, the home loan interest rates are of two types: the fixed interest rates and the floating / adjustable rate of interest. There are some firms who offer another type known as tru-fixed rate of interest under which the interest rate remains constant for 3-5 or 10 years and later gets into floating module.

Before you plan to avail a loan, it’s better to stay updated with the current home loan interest rates from the lender institutes which you're eyeing on to avail the loan. Read the newspapers, magazines on regular basis, else you can visit the website to know more about interest rates.

Each bank has different criteria for sanctioning the loan. It's customized accordingly to the individual need.

Here a few important things to follow while choosing the right finance for your home:

Firstly, identify your needs in order to apply for a suitable loan. Understand the income source, risk appetite, an additional income source and credit score as they can highly help you in negotiating for the best home loan interest rates. You should first estimate the amount you require and then see lenders as per your financial needs.

Just because any bank or non-banking finance company offers huge discounts, doesn't mean they are right for you. Initially they may give a discount but later on, fetch unnecessary money towards loan charges from your pocket. So, it’s better to compare interest rates, tenure, loan amount, their certification, credentials, terms and conditions and then go for the one that clearly proves affordable on your pockets.

The website of leading banks and non-banking financial institutions will have a lot of information about the customized products they offer. It’s better to use EMI Calculator that will give an exact idea on what your loan looks like, the principal amount you pay, the home interest rates that are charged, processing fee, and the exact equated monthly installment that you're supposed to pay to the lenders to clear the loan during the tenure. They help you cut down the hassles of usually tedious and time-consuming process. It’s a simplified process and loaded with required data, amortization details, and ability to alter components like interest rates, tenure, or else different permutations and combinations.

Few things to consider reducing your house loan interest rates.

Nothing compares to the joy and happiness you get when months of patience leads to finalizing your dream home in your city. However, not everyone can afford to deal fully in cash while buying home. Due to prior responsibilities, growing inflation and high costs property it becomes difficult to pay entire cash to buy your home. Naturally, you’ll search for some finances but traditional finance could prove a big blow to your pockets because of extremely high-interest rates and hardly any time for repayment. Therefore, the ideal way to finance your dream home would be taking a home loan on it. But, when you apply for a housing loan, the final choice is mostly based on interest rates.

The current house loan interest rates available in the market have seen a steep reduction, and with schemes like Pradhan Mantri Awas Yojana, it has become more viable for a common man to crack an affordable interest rate deal. You might feel like you managed to dig gold with rates you have received from lenders, but here are few things that you can watch out to reduce your house loan interest rates further:

Take shorter duration:

Although shorter duration would increase your monthly installment, it will ensure that your principal amount gets repaid earlier. Since the interest rate is applied to the principal rates, it's important you do repayment as early as possible. So once the bank or finance companies recover the principal amount, the absolute interest payout will decrease marginally.

Set monthly installment targets

Your loan is just another important responsibility of your life. So, make it a goal to pay an extra monthly installment every year. It will help to get to the finish line much before you have expected. When you get bonuses or any policy maturity benefits don’t splurge it on parties and hi-tech accessories. Instead, try to make as much payment as possible towards your loan. It will also incur low house loan interest on the remaining principal amount. It will help you get the finish line easily and much before than expected.

Don’t hesitate to re-finance

Many people fear refinancing might incur additional costs and would distract the repayment schedule. However, it’s not as such. At any point of time, you feel you’re being duped with high house loan interest you can approach other banks and finance companies for balance transfer for lower rates. You can think about switching to the other lender. There are leading finance companies who give re-finance rates of mere 8.40 to 9.40 % and if you’re a women candidate you can enjoy a special concession of around 0.5% of the loan amount. Even a 0.5% reduction can make a vast difference and save your lakhs of rupees.

So, don’t hesitate to take the plunge, do check the legal fee and the prepayment penalty as well. It would be wise to do a cost analysis for higher savings with low-interest rates.

Though, every borrower tries to get lowest possible house loan interest make sure the option you settle for fits comfortably with your monthly finances. While your aim should be making repayments at the earliest, don’t set an EMI that extremely high and you later might face trouble in paying the money. Missing payments can lead to bad credit score.

Fixed or floating house loan interest rate? See which one is better for you.

Taking a home loan is always a difficult decision. Moreover, it’s a decision that’smade of many other small yet highly important decisions such as choosing a lender, the loan amount, the tenure, etc. Of these highly important decisions is choosing between fixed and floating rates of interest. There are many customers out there that are very confused with regards to the type of interest rate they should choose. If you are one of these individuals then don’t worry, this article will discuss both types of interest rates and help you choose which one is right for you.

Fixed House Loan Interest Rate:
As the name suggests, this type of house loan interest rate stays fixed during the entire tenure of the home loan. It’s generally higher than floating rate of interest and provides borrowers a very good amount of certainty. It allows for better planning and provides customer a large amount of foresight in regard to their repayment structure and process. One can make calculation more easily and can have complete peace of mind with sound financial planning fixed home loan interest rates provide.

If you are middle-aged, risk-averse ad wish to plan your home loan repayment to the t, then the fixed home loan interest rate is perfect for you. It isn’t affected by the fluctuation in market conditions and doesn’t increase regardless of changing government policies.

Floating House Loan Interest Rate:
Again, the name is pretty much self-explanatory. These rates are generally lower then fixed rates. They change in relation to market conditions and government policies. They are never fixed and so the interest rate paid every month can be different. The rate may go up or fall further with corresponding changes in the market.

If you are young, don’t mind the risk and are looking to save some money, then you should go for this type of home loan interest rate. You’ll be able to save loads of money in comparison to fixed home loan interest rates.

What do the expert say about choosing a house loan interest rate:
Firstly, interest rates are at their all-time low and experts predict that these rates will fall even lower in the coming years. So if you opt for a fixed rate of interest, you could miss out on significant savings. Moreover, floating rates are not known to rise above fixed rates.

If you are still not able to make your mind about house loan interest:

If you are still confused, there is another option. It’s called the semi-fixed rate of interest. This type of interest is fixed to begin with and then adopts the floating rate of interest after a certain amount time, say 5 years. This type of interest rates serves both type of borrowers and is ideal if you can predict fall market gains or losses.

You can also switch house loan interest rates midway.
If you are not satisfied with fixed or floating rate of interest rates after choosing either one, you can simply switch over the other by paying a small fee. It makes sense to switch if you are not comfortable with the option you’ve chosen.

Choosing between fixed or floating interest rates is a decision that could prove to be a master-stroke or blunder, so choose wisely. Make use of the internet, speak to financial experts and speak to friends and family to make an informed decision.

Some ways to reduce the interest rate on home loans.

Buying your dream home involves a lot of planning, property survey, builder’s reputation, money at stake and lastly cracking a better housing loan deal. When it comes to housing finance the first thing buyers are concerned is the interest rates incurred on your loan. Interest rate play an important role in your home buying decision, when one opts for a housing loan.

You can say it’s a decisive factor. Presently, the home loan interest rates are around 8.50 to 9% mark that looks quite attractive compared to 3 to 5 years back.

Other factors banks or private companies use to determine rates are as follows: Age of customer and the property, repayment capacity, educational qualifications, job stability and income source, number of dependents, co-applicant’s income, assets and liabilities, savings habits, credit history and future inflation costs.

Your interest rates will impact your principal amount, your monthly installment and other fees. So, it’s better to carefully evaluate it before availing a loan. There are several ways to reduce the interest rates all the more.

Some of them would be:

• Women are offered special concession of around 0.5% on home loan.

•  If you hold a good credit score you can negotiate with the private vendors and banks for better home loan interest rates.

• If you hold a joint income with your spouse or parents you tend to get a lower interest rates or higher principal amount as per your requirements.

• If you take home loan when you’re young investors have a faith on you that you’re in a position to pay the debt on time thus you can negotiate on rates.

• Having a suitable job or sound business can help you fetch good amount of discount on your housing loan interest rates.

Experts say borrowers should take into consideration one’s current and future cash flows, while deciding the monthly installments. Banks or private finance firms are also flexible in keeping a lower monthly installment during the intimal years. Higher monthly installment may eat up a major chunk of your earning that could lead to financial distress.

There are several online sites that help buyers calculate home loan interest rates using loan calculator. These calculators give an exact table array of principal amount, interest rates applicable, processing and other charges incurred on your entire tenure of housing finance.  This way you will be prepared before hand on exact EMI and the interest rate that you have to pay on your housing loan.

These days using online aggregator sites you can compare based rates and spreads across various banks and private finance companies on your home loan. If you see substantial scope to reduce the home loan interest you can consider the following options:

Maintain a good relationship with the lender, and then negotiate for low revised rates by paying a one-time fee, being charged by banks or finance firms.  Migrating to another bank or finance company could prove beneficial who often target the potential customers with slashed rates. Remember even a 0.25 to 0.50% on your home loan interest rates can make a vast difference and help you saving lakhs of rupees on the long run.

Here’s how to play smart with home loan interest rates.

Most people think of interest rates as a pain in the neck at the end of every month. For some it makes the entire repayment process a tedious and straining one. But there are many ways to play smart and ensure this cost always plays to your advantage. This article will help you with a few ways to plan for this expense, lower it and save money with it, read on to find out more.

Work on your credit score.
A good credit score gets you quicker approvals and you probably already know this by now. But did you know that credit scores also allow you to negotiate your interest rates too? Yes, if you start working on credit score by making timely credit card bill payments, not exceeding the credit card limit and by making all other debt repayment on time, you can leverage a good credit score in order to get lowered interest rates. The difference might only be a decimal point here or there, but even that can help you save loads of money in the long run.

Save for a bigger down payment.
It’s not alwayshome loan interest rates that are a problem. If your loan amount is large, the interest payable will also be more. If you save more and borrow less, the interest will be calculated on a smaller loan amount and hence you will end up paying much lesser in terms of interest.

The next tip is to always use an EMI calculator.
When you know what you’re up against, creating strategies to come out on the winning side is much easier. If you use an EMI calculator before the repayment schedule starts, you will know just home interest rate you have to pay and hence you can properly budget your expenses to accommodate this cost. This is because an EMI calculator will tell you how much EMI you have to pay each month for the entire tenure of your loan. This knowledge will help you plan you repayment process smartly.

Always keep balance transfers on your mind.
If your interest rates are too high and you want to lower them, then balance transfers are a great option. Many lenders offer lowered home loan interest rates to customer willing to switch lenders and transfer the balance loan amount to them. Most people will say there are too many charges involved to switch, but these charges will mostly be much lesser in comparison to the savings you get from home loan balance transfers.

Use home loan interest rates to save on taxes.
You can use the interest you pay to save on taxes. Under section 24 on the Indian Income Tax Act, you can avail tax deductions up to Rs. 2, 50,000 every year against the interest you pay towards your home loan. This way it’s an expense that helps you save just as much as you pay.

A combination of beforehand preparation, planning and tax savings will help you save loads of money with your home loan interest rates.

How save money with your home loans interest rates.

Most people think their interest rate is robust number. They think what the lender gives them in term of an interest rate is what they have to pay. But there are few ways to save money with your interest rate and this article will discuss some ways to save money & make the most of your interest rate.

Work on your credit score.
Some lender might tell you that you have a poor credit and attach a poor interest rate to your home loan. However, if you work on your credit score by making timely payments toward things like your credit card bill and your loans, your credit score will improve. You can then use this as leverage to obtain a lower interest rate. Even .25% here or there can help you save a good amount of money.

Compare.
Some people go with the first lender they come across. It’s often a lender they trust or heard about or a lender their parents trusted, but this is not the ideal way to go about thing. Rather, it’s advisable to compare the interest rates from many lenders before fixing on a particular lender.

Make higher down payments.
If it’s within your financial reach to make higher down payments then doing so will reduce the loan amount. Since the interest amount is calculated on the loan amount, this will help you save a lot on the total interest you will have to pay.

Choose floating rate of interest.
Floating home loans interest rates start of lower than fixed interest rates. So in the initial years, you can save big. Then even if the rates go up, they might not go over the fixed rate, which means you still save. If the rates go over the fixed rate, it won’t be for the entire tenure.

Switch to another lender.
If you find another lender that is providing lower interest rates, simply shift your loan to that lender. So it’s good to look out for offers on home loans even after you’ve taken a home loan from a particular lender. You might find that even after paying processing fee and loan transfer fee, the lowered interest rate can help you save a good amount of money.

Negotiate.
The interest rate handed to you isn’t something that you can’t negotiate. The lender puts a margin on the base rate that’s stipulated by law. Chances are if you try hard enough, your lender will give in and reduce your home loans interest rates by 0.10 or 0.20 percent.

Use your home loan interest rate to save taxes.
After all these measures, your interest rate will probably at the lowest it can get. But that doesn’t mean you can save any more. Under Section 24 of the Income Tax Act you can avail deductions against the interest paid towards a home loan. This deduction is subject to a maximum limit of Rs. 2 Lakhs

So not only can you reduce your home loans interest rates, you can also negate its cost to your income by using it avail tax benefits. Keep these points in mind when you apply for a home loan, they will ensure you save a lot of money!

Things you need to know about your home loan interest rate.

The interest payable towards a home loan makes some people decide against the loan altogether, it make others pull their hair out at the end of every month, whereas for some it’s just a small price to pay to own a home of your own. But believe it or not this price comes with some advantages and a lot of intricacies. So before you pass judgment on or apply for a home loan, here are some things you should know about the interest payable towards a home loan.

It beats paying rent & helps you invest in property.
Your house loan interest is part of the EMI you pay every month and though it might seem like an expense, it’s much better than throwing away money in the form of rent. The interest you pay along with the principal amount also act like an investment plan. After the tenure is over, you would have a piece of property that not only belongs to you but also would have appreciated greatly over the tenure of your loan. In comparison to renting where your money buys you nothing, taking a home loan & paying interest is a much better choice.

There are types of house loan interest rates.
When you opt for a home loan, you can choose between fixed & floating interest rates. Fixed interest rates are slightly higher than floating rates and are designed to suit risk-averse borrowers. Floating interest rates on the other hands are slightly lower and can fluctuate over the tenure of the loan based on market performance and government policies. This type of home loan interest rate is best suited for younger people whose salary is bound to increase over time.

You can calculate home much interest you have to pay in advance. EMI calculators available online allow you to arrive at the exact interest rate payable for each month of the tenure of your loan. These calculators allow you to know the EMI payable beforehand and thus allow you to better budget your monthly income to comfortably pay back your loan.

You can save taxes with your house loan interest.
Under section 24 of the Indian Income Tax Act, the interest paid towards a home loan can be used to avail deductions from your income. Under this section, Homeowners can claim deduction of up to Rs.2 lakhs per year. If the tenure of the loan is 20 years, you can save up to 40 lakh over the course of you home loan.

You can pay less house loan interest by paying a larger down payment.

If the interest payable against a home loan is worry for you, you reduce it by saving up and paying a larger down payment. Since the interest amount is calculated on the amount borrowed, a higher down payment will result in a smaller borrowed amount and in turn lesser interest payable.

These were some basic pointer you need to keep in mind when you address the topic of house loan interest and it rates.