Top 7 Factors that Determine your Mortgage Interest Rate
Are you looking to apply for a mortgage loan to borrow a large loan amount and meet many of your needs? If yes, then you are not alone!
Many people apply for a mortgage loan like the loan against property since its secured finance.
Being secured in finance, mortgage loans attract an affordable rate of interest. This way, you can manage your outlays by paying smaller EMIs.
If you want to enjoy lower loan against property interest rates, then you ought to know what determines the loan rates.
Read on to know some vital factors that determine the loan against property interest rates!
1. Your Credit Score
Your credit score is one factor that affects the interest rates of mortgage loan. The higher is your cibil score; the lower may be the interest rates offered by lenders. A higher score showcases that you are a reliable loan customer. And hence; creditors reward you by offering a lower rate of interest. A cibil score of 750 or more is considered ideal for anyone to get the loan approval at a lower rate.
2. Your Location of the New Home
Lenders may provide you with a lower or higher loan against property interest rates depending on where your home is located. Thus, it depends on where you are availing the loan and in which city. If you use the loan money to buy a new home in an area with poor infrastructure, then the applicable rates on it will be higher. It is because lenders will find it tough to liquidate it in case of defaults.
3. The Price of the Home and the Loan Amount
If you are availing a larger or smaller loan amount, then you have to deal with a higher loan against property interest rate. The money that you need to borrow for the mortgage loan is the price of the home + closing charges – your down payment. Hence, buying a home that is carrying a bigger price will mean borrowing a large loan amount. Such loan types lead to a higher interest rate. And vice-versa is true for a smaller loan amount for a home with a small price tag.
4. Down Payment
If you manage to put down a large down payment – about 20% of the value of your new home, then you will get a lower rate of interest. It is because you will only need to bother about the applicable rate on the remaining 80%. Not being able to put down 20% may lead to paying EMIs consisting of a higher amount + interest charges.
5. Loan Tenor
Opting for a smaller tenor may mean paying higher EMIs but lower mortgage interest rates and vice versa. If you can, then you should go for a smaller loan tenor and avoid paying higher interest rates.
6. The Types of the Interest Rate Applicable
In general, there are two types of interest rates – fixed and flexible. Fixed rates remain the same over the tenor. Flexible rates come with a fixed initial phase, and after that, they may reduce. Hence, your starting rate of interest may be lower if you opt for a flexible rate compared to a fixed rate. But that may slowly increase later.
7. Loan Types
Mortgage loans may be of various types such as the loan against property and more. The rate of interest could be different and may be based on what type of loan you choose. You should get in touch with your lender to dig deeper into this. This way, you can have an idea of what kind of mortgage loan will suit your needs.
You now have an idea of the vital factors that majorly determine the mortgage loan rates such as the loan against property interest rates.