What Is Home Loan Interest Rate and How Is It Calculated
Are you skeptical about taking a Home Loan because you don’t know how much you might have to pay in the form of interest? Say goodbye to your Home Loan Interest Rate doubts because it is now possible to calculate how much interest rate you will pay for the loan taken. Thanks to the Home Loan Interest Rate Calculator, a quick online tool that helps you instantly find out the interest rate, EMI, and even your total repayment amount.
But what is the Home Loan Interest Rate?
The lending institutions charge the customers a percentage of the principal amount for using the funds. This percentage is called the interest rate. Every lending organisation determines a Home Loan rate that they wish to offer. However, these finance companies have to follow a minimum interest rate benchmark. This is called as the MCLR or Marginal Cost of Funds Based Lending Rate and it was implemented by the Reserve Bank of India. So, even though finance companies can decide an interest rate for their customers, it cannot drop lower than the Marginal Cost of Funds Based Lending Rate or MCLR.
Types of Home Loan Rate
Home Loan Interest Rate is of two types, fixed and floating. Fixed Home Loan Rate remains constant throughout your loan tenure even if there are any fluctuations in the market. On the other hand, Floating Home Loan Interest Rate changes in accordance with market fluctuations. The Floating Home Loan Interest Rate in India is reviewed on a quarterly basis. The banks and lending institutions usually make amends to the tenure and keep the EMI amount constant. There is also the mixed interest rate wherein the rate of interest remains constant for a certain number of years initially and then changes as per the market situation.
How You Can Calculate The Home Loan Interest Rate
The most accurate way of finding out your Home Loan Rate is through a Home Loan Interest Rate Calculator. Using this calculator you can find out details such as your monthly EMI and your interest rate even before you apply for a loan. It is an extremely helpful tool as it helps you make the right decision and save yourself from any financial losses. When using the Home Loan Interest Rate Calculator you need to feed in some details like your monthly income, age, desired loan amount, and so on. Based on these factors the Home Loan Interest Rate Calculator will instantly calculate the rate of interest for you
Factors Impacting Your Home Loan Interest Rate In India
Your Home Loan Interest Rate in India is an important point to be considered when taking a Home Loan. Your EMI amount and also the total amount that you repay against your Home Loan depend on the Home Loan rate. So, before opting for a Home Loan, it’s crucial to understand what factors are responsible for deciding the Home Loan Interest Rate and how it impacts your Home Loan deal in general. Although some of these factors cannot be changed, there are a few aspects of your financial situation that you can change to avail of a better Home Loan Interest Rate.
• Credit Score The applicant’s credit score determines their creditworthiness. So, it is only obvious that a better credit score will get you a more affordable Home Loan Rate as opposed to a not-so-good credit score.
• Property Location and Value An upmarket location with a higher property value will get you comparatively better Home Loan terms. So, choosing a good location will improve the resale value of your home. That in turn will fetch you a good Home Loan Interest Rate in India.
• Stable Employment Regular income is another crucial factor indicating the applicant’s repayment capacity. Increasing your income or disclosing multiple income sources can also be of help in determining your repayment capacity, which will help you with a good Home Loan deal.
• Loan Tenure Another important factor that can help you lower your interest rate is your loan tenure. A longer tenure allows you more repayment time and a lower interest rate. Whereas a shorter tenure incurs a higher interest rate to compensate for the lesser duration.
• Type of Interest The types of interest rates you can choose from are the floating rate, fixed rate, and mixed rate. A fixed interest rate is higher as compared to floating interest rates, but floating interest rates are unpredictable.