New year, new dreams. If buying a house of your own is one of your dreams in 2023, then it is very much possible – thanks to home loans. However, if you take a home loan, you will be required to pay the EMIs for almost 25 to 30 years. So, this is for sure that you will be looking out for the minimum rate of interest. And how do you get that? We have the answer, but first, let’s start with the basics.
What are interest rates and EMI?
When banks or any lender provide you with the money, they charge a certain amount of money in addition to the loan amount. This is called the interest rate. This is also one of the ways that banks earn money. Every institution charges interest as per the facilities they are offering and the amount of cash you have borrowed from them, and your creditworthiness.
The rate of interest is calculated per annum. For instance, if the bank offers you the loan amount at 7% per annum interest and your principal loan amount is 100,000, you will be paying 7000 extra to the bank by the end of each year. Now, what is EMI? When you take the loan, you are required to pay back the money to the lender with the due interest. And this amount is paid back through monthly installments, called EMIs. Considering the amount you have taken as a loan and the tenure you have chosen, your EMI amount will be decided.
The lower your housing loan interest rate is, the lower will be the EMIs. Now the question is, how do you get the lowest home loan interest rate, especially in 2023?
Do your research homework before selecting the lender
Here, the internet is your best friend. All the information is available on the internet these days. The current rate of interest, the latest schemes, and much more. Many banks even have real-time EMI calculator that can help you with the exact amount you need to pay every month. You can even mix and match the tenure and loan amount to see how you can get the best rate of interest. Once you have done your research, you can compare the interest rates of different banks and see which one suits you the most.
A healthy credit score helps
A good or healthy credit score means that you are the kind of borrower who always pays back on time. The credit score is not something that you can change overnight. You need to make sure that you have a good credit score from the very beginning. And for that, ensure that you pay all your EMIs (If you have taken the loan before) as well as your credit card bills on time. Delaying any of the payments can negatively affect your credit score, which can also affect your rate of interest. If your credit score is good, then you not only get the loan easily but also your rate of interest is less.
Increase your down payment amount
Your down payment amount affects your rate of interest too. The bigger your home loan amount is, the more interest you will have to pay. It is advisable that you should pay as much as you can in the beginning and keep the loan amount less. In an ideal situation, the lender can give as much as 80% of the total amount and the rest has to be paid by the borrower. But if you can afford to pay more, please do so. This will reduce your rate of interest, and in turn, your EMIs as well.
Opt for prepayment
There are many banks or companies that offer prepayment facilities after a certain amount of time. To give you an example, if you have taken a loan of 20 lakhs and after a certain time, you have 5 lakhs to give to the bank, you can do so. This will bring down the interest rate and your EMIs.
In case another bank is offering a better rate of interest, you can borrow the amount from them and pay your original lender too.
If possible, fo for a shorter tenure
If your tenure is more, then naturally you will have to pay more. If it is possible for you to manage with a shorter loan, make sure you do that. If instead of 35 to 40 years, you can go for 20 years or less, this will affect your EMIs with a great number.
Go for fixed rate of interest
With a fixed rate of interest, you save yourself from disturbances in the market. It is preferred for home buyers to go for a fixed rate of interest and secure their money. You should also take into consideration the present economy and the rate of interest at the time of applying for the loan.
In short
Apart from following the above points, you should also talk to your friends or family members who have taken out a home loan before. Once you have done that, compile all the information and then make a smart decision.
