Home loans are long term loans wherein you repay the loan for up to 20 or 30 years. Since the loans are long term, it becomes necessary to have EMIs which are affordable in your pockets. Home loan EMIs consist of two parts, the principal loan amount and the interest payable on the outstanding balance of the loan. Home loan interest rate are additional costs of the loan and so many borrowers try to lower the rate. Can the rate be lowered?
Yes, the home loan interest rate can be lowered by availing a discount. Lenders give a discount on the home loan interest rate in specific instances. These instances include the following –
When you have a good credit score
A credit score reflects your repayment history, and if your score is 700 and above, it tells the lenders that you would be able to repay the loan easily. In fact, the higher the score that you have the better it becomes for lenders to offer the loan. That is why if you have a very good credit score the lender might offer you a discount on your home loan interest rate.
When you avail the loan during festive times
During festive seasons, lenders come up with various offers and promotional deals for home loan borrowers because during such times the demand for real estate shoots up and lenders want to encash upon the increased demand for home loans. Therefore, to attract home buyers, the home loan interest rates are lowered so that the borrowers are motivated to avail a loan.
When you are an existing customer of the lender
If you have had a long-standing relationship with a lender, you might avail a discount in the interest of home loan if you avail the loan from such lender. Given your relationship, the lender would know your financial standing, which would help it to determine the ease of repayment of the loan. If your financial status is good, the lender might offer you a discount on your home loan interest.
When you put a higher down payment
When you avail a limited amount of loan on the value of the property, it is favourable for the lender. In such cases, the lender might offer you a discount on the home loan interest rate.
When you negotiate with the lender
The home loan interest rates can be reduced through effective negotiations. You can negotiate with the lender on the loan interest rate and if your negotiation is effective, you can avail a discount on the rate.
When you shop around
Shopping around for a home loan doesn’t exactly offer you a discount on the interest rate, but it helps you find a home loan with a lower interest rate. There are multiple home loan lenders and each lender offers a different interest rate on loan. So, shopping around helps you find the home loan with the lowest interest rate, which reduces the interest payable on your home loan.
So, if you want to reduce the burden of interest rate on your home loan, you can use any of these instances to avail a discount on your home loan rate.