Availing home loan? Know best ways to do it

If you want to take full advantage of the historically low home loan rates being offered by banks along with festive concessions, keep in mind these seven key factors that may help you grab the best possible deal.

Business Desk, ETV Bharat: If you are one of those who are planning to buy a home/property anytime soon, the good news is it is probably the best time to avail a home loan as banks have reduced their lending rates to multi-year lows.

Home loan rates at many public and private sector banks, along with housing finance companies (HFCs), have now come down to below 7% after the Reserve Bank of India (RBI) reduced repo rate to just 4%.

However, it is important to note that home loan rates still vary from customer to customer depending on factors like an individual’s risk profile, credit history etc.

So, if you want to get the best home loan deal, here are some of the key pointers you should keep in mind to reduce the cost of your loan as much as you can:

1) Credit score

Banks/HFCs always consider the applicant’s credit score before evaluating the application for a home loan and offering the final lending rate. Those with higher credit score (750 and above) have higher chances of loan approval as they are considered more creditworthy. But even if your credit score is lower, your loan may be approved, though at a much higher rate.

So, in order to get lowest rate, keep a tab on your credit score and try and ensure it stays above 900. Also, try and apply for a joint home loan as you might be eligible for a lower home loan interest rate if your co-applicant has a better credit score than you.

2) Gender

Many banks in the country offer women applicants a better home loan rate in order to promote home ownership among females. So, if possible, apply for home loans with the woman of the house as main applicant to get concessional interest rate. For instance, many commercial banks offer a 0.5% concessional interest rate on their home loan for women.

3) Employment/occupation

Your occupation may also play a role in the home loan rate you are offered. Salaried employees usually get a lower home loan interest rate than self-employed/business owners as the former category has a fixed source of income and is considered less risky when it comes to loan repayment.

So, in case of two applicants (like a husband and wife), please check whose occupation would be considered less risky and would be offered lower interest rates. For instance, even among salaried, government employees might be favoured over private sector employees. Similarly, among the self-employed, doctors and chartered accountants (CAs) are considered least risky professions, so they may be offered better rates.

4) Size of the loan/loan amount

A higher loan amount always attracts higher lending rate. So, try and pay higher down payment to reduce the overall loan amount, and thereby avail lower rate. Higher down payment will also make the borrower come in the “less risky” category and may therefore enjoy further concessional rates.

5) Interest rate type

While applying for a loan, it is important to decide whether you are opting for a fixed rate loan or a floating rate loan.

Fixed rate loans mean interest rates on your home loan remain the same throughout the loan tenure, helping you plan better. While, floating home loan rates are not fixed and are linked to a benchmark rate. So your home loan rate (and thereby your EMI) may increase or decrease over the tenure of your repayment period.

Generally, fixed rate loans rates are slightly expensive than floating rate loans but be careful as the long-term cost may differ depending on interest rate scenario.

6) Negotiate the fees

A home loan often requires payment of various fees, such as loan origination or processing charges, administrative charges, documentation, late payment, changing the loan tenure, switching to different loan package during the loan tenure, restructuring of loan, changing from fixed to floating interest rate loan and vice versa, legal fee, technical inspection fee, recurring annual service fee, document retrieval charges and pre-payment charges.

It is important to note that every lender should be able to give you an estimate of its fees beforehand and many of these fees are negotiable/can be waived too. So always negotiate with your bank before agreeing to a particular fee.

7) Check the latest offers

Banks keep rolling out festive season offers around this time of the year to bolster credit offtake. Currently, SBI has waived off all processing fees for loans applied through its YONO app and is also offering an Interest rate concession of up to 10 bps based on credit score and 5 bps if applied through the YONO app. So check such offers from various banks before choosing your borrower.