You Should Be Aware of These Uncommon Factors That Influence Your Housing Loan Interest Rate!

Buying a house is most probably going to be the biggest financial investment of your life. Affording a house is no small feat, and most people rely on the support of home loans to arrange the required funds. Now, while a housing loan does provide the necessary financial support for a property purchase, it is still very important to focus on getting a good loan plan from a lender. This is because there have been cases where borrowers have struggled in the past with the repayment of their loans. In many cases, the reason for this struggle is the high interest rate that they are paying.

Housing Loan

Home loan interest rates can have a significant influence over the loan’s monthly instalments, which is why it is important to get a rate that results in suitable loan EMIs. Now, to get a decent interest rate, you need to know about the factors that influence this rate. Most borrowers know about the obvious ones like credit scores and market rates, however, there are other factors that you might be unaware of that impact the housing loan interest rate.

Here are 4 uncommon factors that can influence your home loan rate:

1. Location of the property

If the house that you are buying does not have a good neighbourhood, is poorly constructed, or offers low-profile amenities, it is very likely to have a low resale value. Your lender is going to consider the location of the property to understand its value. If the property value is low, the lender might levy a high interest rate on the home loan.

2. Repayment tenure of the loan

Many people are not aware of the fact that even the repayment tenure that they choose can affect the home loan interest rates. The longer the tenure, the higher the risk for a lender, which is why the interest rate can be higher for longer tenures. Keep this in mind while choosing the repayment tenure of the loan.

3. Employment profile

Any lender would require the borrower to have a stable monthly income and maintain a steady employment record. Without this, there is a risk of the borrower not being able to pay back the loan, which is why lenders can charge a higher interest rate.

4. MCLR rate

The MCLR rate is considered the benchmark lending rate by financial institutions while giving out loans. This rate has 4 financial principles including operating costs, marginal cost of funds, CRR (Cash Reserve Ratio), and the premium. Since these factors differ for various financial institutions, they have different MCLRs. A low MCLR makes it possible for a lender to charge a low interest rate for a home loan.

Before you apply for a home loan, it is important to know about these factors since they can be instrumental in affecting the interest rate of your loan. It is best to make use of a home loan EMI calculator in order to understand whether the EMIs are affordable or whether you need to keep looking for a lender that offers a better interest rate.

Pamela W. Holloway

Hipster-friendly zombie fan. Writer. Internet specialist. Bacon maven. Pop culture practitioner. Spent 2002-2010 developing strategies for saliva in the aftermarket. At the moment I'm supervising the production of mosquito repellent in Africa. Was quite successful at lecturing about acne in Cuba. At the moment I'm working with wieners in the aftermarket. A real dynamo when it comes to implementing Yugos in the UK. Spent 2001-2005 donating wooden trains in Pensacola, FL.

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