Rated Up – How To Make The Most Of Home Loan Rates

When applying for a home loan, all applicants must be aware that banks charge a certain amount of interest on the home loan. Most banks provide their customers with a variety of home loans which help one select a home loan that fits their needs. If chosen correctly, it can reduce the financial burden that the borrower faces each month until the loan has been repaid. All applicants when applying must try to reduce the home loan rates provided to make their loan more affordable. There are a variety of ways in which one can attempt to reduce the home loan rates set by the bank:

* A borrower must firstly ensure that they have a good credit score and are eligible for the home loan being applied for. Creditworthiness of a borrower is something a bank looks at and if it is higher, it can convince the bank to provide an affordable interest rate.

* Another way in which a borrower can try to reduce the home loan rates is by paying a higher amount as down payment on the house. Down payment is a percentage of the price of the home or apartment which the borrower is required to pay. It usually is about 20 to 40 percent of the value of the home.

* Depending on the market one can select between either a floating or fixed interest rate. A fixed home loan rate means that the interest charged during the tenure of the loan remains fixed. The benefit of this interest is that it is not affected by changes made by the RBI. This type of interest rate is ideal for those who wish to pay a fixed amount as EMI each month to the bank and do not wish to indulge in any risks. However, this interest rate has a drawback. Even though it is stable, the interest charges are usually one to two percent higher than that charged by floating interest rates.

* A floating interest rate is when the interest rate charged changes based on the RBI requirements. The benefit of such an interest rate is that if the borrower is lucky, the rate might fall below that charged in a fixed home loan rate making it more beneficial to the borrower. However the one major drawback of this home loan rate is that there is also a chance of it to go higher than that charged in fixed interest rates. In such cases, the EMI paid will be higher.

There are a variety of methods a borrower can choose to improve their home loan rates. One can follow any of the above tips to reduce the amount of EMI they pay each month.