How Do HFCs Set Your Home Loan Interest Rates?

Home loans are viewed as a step towards your dream home by several property buyers. They are right. But, this is the most crucial step of the buying process. It leads to a 30-year-long financial relationship between lender and borrower, after all. Though every facet of home loan plays a role, home loan interest rates are most important for valid reasons. Home loan rates, determined by a lender, can affect home loan EMI at any point of time in the home loan tenure. Their impact can shake the dream land indeed. That’s why; savvy borrowers are curious about a lender’s procedure to set housing loan interest rates. Here is the quick preview of the process for you.

External factors:

A housing finance company has to undertake an extensive procedure to decide your home loan interest rate. But, several factors are determined by the external financial market environment. Here are the significant factors influencing the rate of interest.

* Repo rate, which is determined by RBI
* RBI rules and regulations about home loan rate, prepayment rate, etc.
* Demand and supply in real estate market
* Stability and growth in equities market
* Employment rate

Internal factors:

A housing finance company will also consider few factors, which vary from home loan to home loan. These factors can be partially controlled by a borrower. In other words, if interested, you can make due changes in these factors for availing the lowest home loan rates in India. This effort will require a certain time period, though. But, if you are ready, here is what you can do to avail lower housing loan interest rates.

* Take a look at your credit scores and visit a credit repair consultant to make necessary changes. Higher credit score leads to lower home loan rates in India.

* Repay your current loans. Prepay them if you have to. This will lower your debt to income ratio, which can increase your repayment ability as far as a lender is concerned.

* Put down more down payment than the traditional 20%. Higher investment in your home will lower the lender’s risk and interest rates.

* Self-occupied properties get lower housing loan interest rates.

Security of your income and dependability of your employer can come into the picture too. Each lender has a unique way of incorporating these factors into a home loan calculation. Thus, it will affect your rate of interest and EMI. But, the extent of influence and the direct correlation remains unknown. Most lenders consider this information privileged. They do not disclose it.But, a formula for these home loan calculations remains simple. Lower the lender’s risk and get the lower home loan interest rates. Let’s hope this helps you avail the best rates for your dream home.