It is obligatory to keep an eye on the repo rate announced every quarter by the RBI. Fluctuations in the rates will impact the lending rate on home loans proportionately. (Bajaj Finserv)
It is obligatory to keep an eye on the repo rate announced every quarter by the RBI. Fluctuations in the rates will impact the lending rate on home loans proportionately. (Bajaj Finserv)
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What is the best way to avail the lowest home loan interest rate in India?

Home loans are high-value and long-term credits. As such, even a slight alteration in the rate of interest will have far-fetching consequences on the total cost of the loan.

After a relatively sluggish performance over the previous few years, the Indian real estate sector seems to have picked up the pace once again in 2019. According to data from premier consultancy firm, Cushman & Wakefield, the segment witnessed a record INR 17,600-crore investment in the first quarter of FY19. On a sequential basis, it is more than a 100% increase from the previous year, peaking the chart for the highest investment in real estate in over a decade.

It bodes well for the realtors of this country and reemphasizes the public confidence in this sector. An increasing number of people are again investing in properties, primarily through house financing options. It is, therefore, crucial to understand how you may avail the lowest home loan interest rate. Post introduction of the MCLR, it is obligatory to keep an eye on the repo rate announced every quarter by the RBI. Fluctuations in the rates will impact the lending rate on home loans proportionately.

Figures to look out for

● 5.4% – Current repo rate.

● 5.15% - Current reverse repo rate

● 8.15% - 8.55% - Current MCLR.

● 1.47 billion – Private Equity and Venture Capital investments in 2018 in USD.

Home Loan Interest Rate: Ways to Reduce It

Home loans are typically high-value and long-term credits. As such, even a slight alteration in the rate of interest will have far-fetching consequences on the total cost of the loan. Consider this as an example –

A loan amount of INR 1 Crore for tenure of 20 years at an interest rate of 8.5% incurs a total interest of INR 1, 08, 27, 757. If the interest rate is increased by just 0.10%, the total interest payable increases to INR 1,09,79,905, which is approximately INR 1.5 lakh more than the previous amount.

Therefore, it is paramount to avail the lowest home loan interest rate to ease the burden of repayment. Here are the top tips to decrease your home loan interest rate.

Maintain a Healthy Credit Score

There is a prevalent misconception that credit score is not as crucial to your housing loan eligibility as it is for unsecured credits. While there is some credibility to that statement insofar lenders are comparatively lax when approving home loans for individuals with a relatively low credit score, the impact is felt on its interest rates. Lenders invariably charge a higher interest rate from individuals who do not possess a credit score of above 750.

Opt for a Balance Transfer Facility

Most lenders provide the option of balance transfer on home loans. You may transfer your outstanding loan amount to a new lender with a lower interest rate with the help of a home loan balance transfer facility.

Avail Government Subsidies on Home Loan Interest Rates

In the amplified growth trajectory of the real estate segment in recent times, government initiatives such as the Pradhan Mantri Awas Yojana (PMAY) and the MahaRERA Act are acting as catalysts.

PMAY, in particular, has made availing home loans considerably less costly, especially for the EWS and MIG categories. Under this scheme, applicants can avail up to 6.50% in interest subsidy on their home loans for tenure of up to 20 years. The highest subsidy amount ranges from INR 2.2 Lakh to Rs. 2.65 Lakh depending on the economic category that the applicant falls under.

Choose Between Fixed and Floating Rates of Interest

Typically, the floating rate of interest is a few percentage points lower than the fixed rate. Furthermore, as the RBI has cut the repo rate for the 4th consecutive month. It currently stands at 5.4%, prompting lenders to reduce their floating interest rate proportionately.

Choose Your Lender Wisely

Not all lenders offer the same rate of interest on their home loans. You should compare the interest rates of different lenders before finalizing. Several lenders offer the lowest home loan interest rates.

A combination of investor involvement and government push through initiatives like the PMAY has breathed a new lease of life to India’s real estate sector, consequently increasing the demand for home loans. With this guide to getting a better home loan interest rate, you may avail it and fulfill your dream of being a homeowner.

Disclaimer: This content is released by Bajaj Finserv. No HT journalist is involved in the creation of the content.

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