Types of Interest Rates Offered on Home Loan On My Salary |
Posted: August 17, 2020 |
Fixed Interest Rate - Fixed interest levels remain the same throughout the loan tenure. For example, if you get a home loan at 10% p.a. for an interval of 15 years, the interest rate won't change till the finish of your loan period. However, lenders allow their customers to switch to the variable/floating housing loan interest levels after completing a specific period of time. Floating Interest - Floating interest rate, also called the variable rate of interest, is at the mercy of the latest lending rates of the bank. Unlike the fixed rate of interest, floating interest rates may change through the loan tenure. The speed is dependent on various factors such as RBI’s monetary policies and revised MCLR or other external benchmark rates. Suggested Read: Fixed Rate vs. Floating Rate - Which one is better? Change in home loan rate? Use mortgage loan EMI calculator to learn its influence on your EMIs The web loan calculator also works as a home loan interest rate calculator as it can help you understand the interest amount due on your mortgage loan along with the overall EMI amount. What Factors Affect Home Loan Interest Rates? Factors in charge of the increase or decrease in the housing loan interest rate in India are: Credit history:Credit score is currently used upfront by lenders to fix home loan interest levels in addition to the external benchmark rate. Lower credit history attract an increased rate of interest on mortgage loan and vice-versa. Home loan on my salary :The loan amount you wish to borrow can also influence the pace at which you get the housing loan. Home loans up to Rs. 30 lakh will often have lower interest rate when compared with home loans of a higher amount. Type of employment:The home loan on my salary interest rate for salaried professionals is lower than the interest rate charged for self-employed professionals. That is so because the income of salaried employees is stable. In case of self-employed, the income is dependent on market conditions and other external factors. Kind of interest rate:Mortgage loan rate of interest is of two types - fixed and floating. The type of interest rate you select for your mortgage loan will determine the pace of which you will repay it to your lender. In case there is fixed rate mortgage loans, EMIs remain the same for the complete loan period. Floating rates, on the other hand, change as per change in its lending rate such as Repo Linked Lending Rate (RLLR). Gender of the applicant:Many lenders like the SBI give you a fixed concession on home loan interest rates for females borrowers. Such banks give you a concession of 0.5 bps for females borrowers on the prevailing interest rates. Type of home loan:Mortgage loan rate of interest also differs according to the types of mortgage loan. Regular home loans have standard rates while its counterparts such as Plot Loans or NRI MORTGAGE LOANS normally have higher level of interest. External benchmark rate:As per RBI’s notification, from October 2019, housing loan interest levels are associated with external benchmark rates such as RBI Policy Repo Rate, the federal government of India 3-Months and 6-Months Treasury Bill yields published by Financial Benchmarks India Private Ltd (FBIL) and every other benchmark market interest rate published by FBIL. Beneath the new regime, any change in the external benchmark rate will affect the house loan interest rate of most banks in India. How is Home Loan Interest Rate Calculated? The technique of calculating the house loan rate or effective interest rate is simple and self-explanatory. Under floating rate home loans, banks specify a formula, which might be external benchmark rate such as Repo Rate and 3-month Treasury Bill Rate plus a given spread. Adding both of these components will provide you with the effective home loan interest rate. Effective Interest Rate (EIR) = Base Rate + Markup Let’s learn about these two components: External Benchmark Rate: It's the minimum rate set by the Reserve Bank of India (RBI). Lenders cannot sanction loan to customers below this rate. It could be associated with RBI’s repo rate or any other benchmark market interest rate published by the Financial Benchmarks India Private Limited (FBIL). Additionally it is at the mercy of frequent changes depending on various inputs. Read Also: How is RLLR different from MCLR? Markup/Spread: Spread or margin is added in addition to the external benchmark rate to get the Effective interest rate (EIR). The spread can vary greatly from one home loan scheme to some other. Ways to get mortgage loan at lowest interest rate in India? Keep Your CREDIT HISTORY Near 900 Your credit history can be an indicator of your creditworthiness. As per RBI guidelines, banks now put it to use upfront to fix home loan rate of interest in addition to the external benchmark rate. Since, high credit score reflects responsible credit behaviour and vice-versa, people with lower credit score can pay higher interest on the home loans. And, people with higher credit score will love lower rates. Apply for Home Loan Jointly You may get the cheapest housing loan rate if you apply for mortgage loan jointly with your wife and make her the primary applicant of your home loan. A lot of the banks provide interest concession home loan to women on an interest rate which is significantly less than 0.5% of the general home loan interest rate. Availing joint home loan will also increase your home loan eligibility as well as mortgage loan tax benefits. Consider Availing Home Loan Balance Transfer You can even decide on a home loan balance transfer if your present bank or lender is charging an increased rate of interest. You can switch to some other bank, that provides less rate of interest. But before making the switch, consider the total cost of loan transfer. Click to know when in the event you go for mortgage loan balance transfer facility. Increase Your Home Down payment Loan amount is another factor that influences your mortgage loan rate. Higher loan amount usually attracts higher interest rate and vice-versa. To get home loan at the lowest possible interest rate, try cutting your loan amount by contributing more women home down payment. How to reduce mortgage loan interest burden? Following will be the few effective ways to lessen home loan interest burden: Transfer your existing loan to some other bank offering mortgage loan at lower interest rate
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