It is no secret that most homebuyers must rely on home loans for financial assistance. While a home loan is a great solution for arranging the required funds for a property purchase, it is also very important to figure out whether the loan is affordable. Borrowers need to ensure that the interest rate offered on the home loan can fit their budget.
Now, there are many ways in which a borrower can effectively bring down the interest rate of their home loan. Take a look at five tips that a borrower should keep in mind while applying for a home loan that can result in lenders offering them low home loan interest rates:
1. Pay a higher amount as a down payment
A home loan does not cover the entire cost of the property value. Based on the amount, a home loan can cover up to 75%-90% of the property cost. Now, many borrowers prefer to give the minimum down payment and get maximum coverage for the property purchase. However, if a borrower is looking to get lower housing loan interest rates, they should try and pay a higher down payment, as this decreases the lender’s risk.
2. Improve your credit score
Any financial institution will check applicants’ credit scores before approving their loan applications. For a home loan, it is advisable to maintain a credit score of 750 or more. Doing so can improve the applicant’s chances of getting a home loan approval. Not just this, lenders also offer good deals to those with good credit scores, such as a lower home loan interest rate.
3. Consider various home loan plans
A borrower can never understand a loan plan most suitable for them if they never consider other methods. So, it is important to consider various home loan plans to understand which lender offers the lowest home loan interest rate.
4. Choose a short repayment tenure
Many borrowers prefer to repay their home loans in long repayment tenures. This is because, with a long repayment tenure, it becomes much easier to repay the home loan in smaller monthly installments. However, since the interest on a home loan is added with each EMI payment, borrowers pay more interest at the end of the tenure. So, to cut down the total interest payment, it is better to pay off the home loan in a short repayment tenure, thereby cutting down the number of monthly installments.
5. Opt for a home loan balance transfer
What about the borrowers who have already taken home loans? In this case, they can opt for a home loan balance transfer. With this transfer, a borrower can transfer their home loan from one lender to another to repay the rest of the loan amount with better terms, such as a lower interest rate.
Once borrowers know the tips mentioned above, they are in a much better position when they get a good home loan deal loan.