Most Common Factors That Influence Your Home Loan Rates

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Most Common Factors That Influence Your Home Loan Rates

Friday, 22 November 2019 | Agencies

Most Common Factors That Influence Your Home Loan Rates

The introduction of PMAY along with the launch of an authoritative regulatory body for the housing sector brought in the much-required transparency to it. At present India’s emerging middle class and its expanding corporate sectors have created a strong demand for properties in Tier I and Tier-II cities. In an attempt to substantiate this demand and supply relation, multiple reputed financial companies are also playing their part. They offer housing finances with attractive housing loan interest rates to bring in more buyers and assist the real estate sector towards increasing its services provided.

A Quick Glimpse into the Indian Housing Loan Sector

  • 5.40% - Present repo rate announced by a 6-member monetary policy committee
  • 29 bps – Financial institute launched reduction on WALR on fresh rupee loans in February-June 2019
  • 10% - Mortgage penetration level that housing credits offer as a percentage of contribution to India’s GDP (FY 2018.)

While the Indian housing sector continues to be the 4th most significant contributor to its GDP, further endeavors are being made to strengthen its hold in the market. Such attempts include the latest update of the repo rate cut by RBI. The government empowered the Reserve Bank of India to regulate housing finance companies. The RBI, in turn, made it a mandate to link housing loan interest rates to any of the 4 benchmark rates set by it.

The rate of interest provided to borrowers will now include the lender’s spread over this set benchmark rate of interest. Leading to an overall reduction in interest rates, high-value loans such as housing finance now come with a lower total cost of the loan. Attractive home loan interest rates are directly relative to the number of prospective borrowers who can now go ahead and avail the home loan.

  • Credit Score

The credit score of potential borrowers reflects their creditworthiness and their repayment history showcases their repayment capacity. Although in case of mortgage advances like home loans, holding a high CIBIL score is not as mandatory as it is to avail an unsecured loan such as a personal loan.

  • Loan to Value Ratio

The ratio between the current market value of a property to-be-mortgaged and the eligible loan amount is a loan to value offered by the financer. It depends on multiple factors including –

  1. Location of a property.
  2. Condition of an asset.
  3. The creditworthiness of the borrower.

It is ideally essential to opt for a lower LTV since NBFCs encourage this by offering lower home loan interest rates. All that borrowers need to do is make a considerably higher downpayment.

  • Repo Rate Set by the RBI

As against the previous basis rate for the MCLR based home loan, the interest rate will now be pegged on either of the 4 set benchmark rates. It ensures that borrowers will now be able to enjoy the immediate effects of rate cuts and hence pay lower EMIs (in case of floating rate of interest.)

  • Term or Duration of the Loan

While home loans are available for a longer tenure that stretches up to 18 years to 20 years, opting for shorter tenure is often reflective of a borrower’s higher repayment capability. Lenders are more willing to encourage this by offering a lower rate of interest on home loans with comparatively shorter tenures.

While looking into such factors can help you avail a lower rate of interest, approaching a lender who offers you a PMAY compliant all-time low-interest rate is another alternative. It calls for the need to avail Home Loans from financial lenders like Bajaj Finserv.

Such home loans come with substantial credit amounts of up to Rs. 3.5 Crore, property dossier, nominal eligibility criteria, easy-to-use EMI calculator, minimum documentation, multiple tenure options, and numerous other additional features as well.

- also presents borrowers with scopes to enjoy the benefits of the lower rates of interest. All that individuals need to do is check their current financial liabilities and opt for a lender who offers such a long term with beneficial loan terms and features.

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