Do you intend to apply for a home loan? Borrowing money to buy or build your home is an easy way to achieve your dreams.
But before you fill out any loan application form, consider the financial market and prevailing interest rates.
Getting a home loan with the highest interest rates costs you big. The higher the rates, the more cost you pay for a loan. As you’ll not always get a loan with low-interest rates, make sure you shop for loans and then decide after finding a lender with favourable rates.
Here are some factors that may limit you from getting a home loan at better rates.
Things that Limit Access to Low Home Loan Interest Rates
You Have a Low Credit Score
A credit score helps to gauge your ability to repay a loan. A low credit score could limit you from accessing house loans at low-interest rates. Many lenders may fail to approve your loan application if your credit score is too low.
When your CIBIL score is low, it shows you are a risky borrower. So, lenders will be reluctant to sanction your loan.
Some lenders will approve your loan with a low credit score. However, you pay interest rates more than an applicant with a higher credit avcılar escort score.
Ensure you get your credit score report before applying for a house loan. If the CIBIL score is too low, work to improve it by disputing any errors in the report. Repaying your existing loans and credits also improves your CIBIL score.
Prevailing financial market conditions affect interest rates. You will pay high-interest rates for a home loan if inflation increases.
When the inflation rate is high, lenders charge higher rates for the declining purchase power of money paid in the future.
However, inflation doesn’t remain high forever. If you’re not in a hurry to buy or build a home, you can wait until the inflation rate declines. You’re sure to get a home with the lowest interest rates if the inflation rate is at the lowest level.
Your Profile isn’t Impressive
What is the source of your income? Which company or industry do you work in? What are your qualification and job?
All these questions help to determine your profile. Many lenders offer the lowest home loan interest rate to applicants with a greater profile.
When you have a higher position in your job or industry and your income is high, it is a sign you can repay your loan without defaulting. So, you can negotiate for a low-interest-rate loan.
Lenders may also charge a lower home loan interest rate if you buy the property from a renowned builder.
Huge Existing Loans and EMI’s
Do you have huge loans you’re servicing, and your EMIs are higher? A lender checks your fixed obligation to income ratio before approving your loan.
That’s an indication of high credit risk. So, a lender may charge you a higher interest rate due high risks involved.
You are at Advanced Age or Buying Older Property
Many lenders look at your age before they approve your loan application.
Are you younger? You may get a home loan with better rates than someone at an advanced age. Lenders consider advanced ages as a risk when extending a credit facility.
The age of the property you seek to buy also influences interest rates. Older properties have low resale value, hence more risky to finance. You will pay higher home loan interest rates if you buy older properties than new ones.
You should always aim at saving costs when taking a loan. A low-interest rate loan is ideal for saving the cost of borrowing. When planning to get a home loan, ensure you improve your credit score first to qualify for a huge amount with lower interest rates. Also, consider important factors like low credit score, inflation, and borrower’s profile. When you’re confident about them, apply for a loan with a reputable lender for the best deal!