How do Lenders Decide the Home Loan Interest Rate

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Non-banking financial institutions offer an array of loans specialised for chartered accountants. Anyone can avail a business loan to expand their firm, a personal loan to cover big-ticket purchases, a loan against property for even larger expenses, and a home loan to purchase/build a dream house at very attracting Home Loan Interest Rate.

How Home Loan Helps

Availing a home loan may be one of the highest financings you can avail in your life. A home loan can help you as a chartered accountant in more than one ways. Home loans are long-term advances with tenors going up to 20 years. Tenors are prolonged so that repayment does not become a financial burden. Despite this, high EMIs often make repayment an inconvenience for borrowers. Additionally, monthly installments become more expensive when the Home Loan Interest Rate for CA is high.

Factors Affecting Home Loan Interest Rate

However, you can ensure to enjoy a comparatively lower rate if you know what influences interest rates. Below are some factors lenders consider to determine the Home Loan Interest Rate.

  1. Loan to Value

Loan to Value (LTV) is the ratio between your loan amount and the price of the property you are looking to purchase. Note that lenders make price estimation if you are going to construct the house.

Financial institutions finance only a percentage of the mortgage’s price. You need to contribute the remaining amount as a down payment. Hence, the LTV can go up to 90% if the loan amount is below Rs. 30 Lakh as per mandated by the RBI. Now, a higher LTV increases the loan amount, making the financing riskier. So, lenders may consequently increase the Home Loan Interest Rate. Seek a lower LTV to enjoy better interests.

  1. Down payment

Again, a larger down payment lowers the LTV – the loan amount you avail is considerably less than the property price. In such cases, financial institutions may offer you affordable loan interest rates with a lower LTV. Try to pay a down payment of 20% as that can help you avail a competitive Home Loan Interest Rate.

  1. Income and occupation

A high income and occupation stability showcase that you are able to repay the home loan for chartered accountants without defaulting.

NBFCs like Bajaj Finserv prefer chartered accountants who hold a Certificate of Practice valid for at least 4 years. The company provides up to Rs. 2 Crore against minimal documentation and approval within 24 hours. Bajaj Finserv also brings you pre-approved offers that help reduce the time to get financing. Pre-approved schemes are available not only with home loans but also with personal loans, business loans, and various other financial products and services. You can check your pre-approved offer by providing only a few essential details.

  1. Tenor

A longer tenor of a home loan may come with a higher Interest Rate while a shorter tenor loan can accrue cheaper interest rates. Also, a longer tenor increases the total interest payable and vice versa.

However, do note that longer tenor lowers the EMIs while shorter tenors have the opposite effect.

  1. Types of Home Loan Interest Rate

There are two types of interest rates coming with home loans:

  • Fixed – Interest rates that remain constant throughout the tenor.
  • Floating – Interest rates that fluctuate depending on marketing condition.

Also Read: SBA Loan for Small BusinessTop 10 Personal Loan Mistakes

Floating Home Loan Interest Rate may be lower than the fixed one. However, the former may increase and become more than the latter during repayment.

Other than the above, a credit score of 750 or more can help you secure a lower Home Loan Interest Rate for chartered accountants. To ensure that you follow the way how to apply for a loan before you opt for one. It significantly increases your chances of approval, thereby, strengthening your credit profile.

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Aisha is a passionate financial blogger and financial adviser. She has been serving society as a financial adviser for the past 6 years. She has an amazing solution for every finance related query. She shares her financial tips and tricks on Loantrivia.com

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