Crucial Insights: Demystifying Housing Loan Interest Rates

Without considering the applicable home loan interest rates choosing a particular offer will be a challenging decision. To avoid the detrimental consequences of borrowing and enjoy a profitable loan offer one can consider reading this article. 

This guide will make a borrower aware of the various forms of home loan interest rates. Also, they will get tips on how they can reduce the overall cost of borrowing money.

Types of interest rates in home loan: Understanding the basic differences

Interest rates for home loan deals are expressed as percentages which can be either fixed or floating (variable). Fixed-rate loans do not get influenced by market conditions. So, if someone opts for a fixed-interest housing loan then they have to pay the same EMI throughout the tenor. 

Contrarily, the standard home loan interest rates for floating rate loans vary based on various conditions such as the repo rate, MCLR, etc. So, the borrower on selecting the second option can take advantage of the lower interest rates temporarily when situations turn out to be favourable. 

Based on the type of home loan selected, the overall cost of purchasing varies significantly. Also, it affects one's budget over the long term as these loans typically come with long tenors.

How to calculate the EMI using the interest rate on a home loan?

The lenders decide interest rates for home loan offers and these rates vary from one borrower to another. This is because multiple factors like the borrower’s age, job profile, income, creditworthiness, etc. are checked before marking whether the candidate is eligible for a loan. 

So, in case one’s profile matches the home loan prerequisites then they can visit that particular lender's website to calculate their estimated EMIs. Here’s how:

Step 1: Mention the principal amount and interest rate

Step 2: Select the desired home loan tenor

Step 3: Click on ‘Calculate’

The EMI amount is displayed on the screen. 

Suppose, a person has put Rs.35 lakh as the principal and the tenor has been marked as 15 years. Then considering the lender will charge an interest of 10%, the borrower’s fixed EMI amount will be Rs.37,611 throughout the repayment term. 

5 Tips to reduce home loan interest rates in 2024

These are some helpful tips that one can follow to adjust their home loan EMIs and make the deal even more favourable:

1. Try to make a higher down payment

2. Compare all the available options online and do proper background research before accepting a lender’s proposal

3. Go for a shorter loan duration

4. Pick an optimal EMI amount that is easily manageable without stressing monthly expenses

5. Opt for a loan balance transfer facility, if required

Every minute resource that one can need in perspective of selecting a home loan is now available on the internet. Thus, candidates just have to utilise these services that are available out there for free. 

Even various financial institutions are eager to extend pre-approved offers to their existing borrowers on various financial products like loans against property, and home loans. Depending on one’s credibility these offers can perfectly match their profiles. These offers drastically speed up the house loan application process. So, individuals can check their pre-approved offers online by entering their name and contact details on the lender's website.

So, as it is evident, verifying the home loan interest rates is just the very first step towards ensuring that one gets to buy their desired home. Next, the candidate must focus on loan approval rates and plan an effective repayment strategy to avoid paying unnecessary interest amounts.