Factors That Affect Your Home Loan Interest Rates in a Big Way

A fact that is hidden from no one is that one of the most basic needs of a human is Home. The Real-estate prices are so high that it is almost impossible for a common person to pay the full amount in one go and own his or her home. For this reason, Banks, NBFcs, and Housing Finance Companies (HFCs) provide the Home Loan facility to customers with which they can opt for a loan amount and repay this loan amount within a fixed tenure upto a maximum of 30 years. But there is one more important thing - Home Loan Interest Rates that several individuals fail to notice.

Home Loan Interest Rates usually tend to vary from one lender to another. When you opt for a loan amount, you will need to repay it via Equated Monthly Installments (EMI) that consists of a part of the principal amount and interest amount. So, if you opt for a higher rate, you will need to pay a higher EMI Amount and vice versa. Apart from lenders, home loan interest rates tend to differ from one individual to another based on a couple of factors. So what are these factors? In this article, we will discuss those factors that affect your interest rates and also about how does Home Loan EMI Calculator work. So, let’s get to it!

Factors Affecting Home Loan Interest Rates

As we told you about the impact of interest rates on the EMI Amount and how there are a few factors that affect your final interest rates. These factors are your credit score, benchmarking, property location, monthly income, employment type, etc.

Credit Score

The first and foremost factor that affects your Home Loan interest rates is the Credit Score of an individual. The reason is quite simple: any lender would like to lend a home loan amount to a person who can manage his or her debt with full responsibility. A good credit score represents creditworthiness and generally considered to be above a score of 750 or more. Lenders like to provide lower home loan interest rates to such individuals as compared to people with a bad credit score. The poorer the credit score of an individual will be, the higher will be the interest rates for him or her. So, it is advised to first improve your credit score and then go for a home loan if you want to opt for lower rates.

Benchmarking Method

Lenders usually go for two benchmarking methods that are Repo Rate Linked Lending Rate(RLLR) and MCLR-linked lending rate. Home loan interest rates tend to differ according to these two benchmarking methods. So, when going for a Home loan, it is important to see which type of benchmarking method you want to opt for.

Employment Type

Home Loan Interest Rates for Self-employed Individuals tend to be on a higher side as compared to rates for salaried individuals. If you are thinking about the reason behind it, let me tell you that lenders believe to have more trust in salaried people as they get their income on a fixed date every month while self-employed people may see some ups and downs in their respective businesses which may impact their repayment behavior. To minimize this, they charge higher rates.

Property Type and Location

If you have a property that is located in a well-known area and all the amenities are nearby, the lender may provide you with Lower home loan interest rates as compared to a property that is located far outside from the city. So, your property location is also one of those factors that lenders check before deciding the rate of interest for you.

Another important thing that you should remember before choosing the final home loan rates is to estimate your EMI amount with the help of the Home Loan EMI Calculator. This tool will help you manage your finances as you can know the EMI amount with it by just putting a few basic details such as Required Loan amount, rate of interest, and tenure. Apart from EMI amount, you can also get Interest Outgo and Total amount payable.