A home loan is a credit that a buyer avails of to buy a new home. Home loans have gained huge popularity in India because they help people to buy the home of their dreams.
Many lenders in India provide home loans and permit the borrowers to repay the loan amount in monthly installments (EMIs). Also, many banks provide you with loans of up to 80% of your property. Some lenders also provide loans up to 90% of your property value if it crosses over 20 lakhs.
This article is completely written on home loans and interest rates applicable to home loans. If you are interested in taking a home loan on your property, then you must get a complete understanding from this article.
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Interest rates on home loan
When someone takes a home loan, they first consider the interest rate. It is an important fact to know to repay the loan amount. Very few borrowers understand the complete concepts of interest rates, the type of interest, how the interest rate is calculated, etc.
In India, there are two interest rates applicable to a home loan, Fixed interest rate and Floating interest rate.
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Fixed interest rate
As the name suggests, this type of interest remains constant in the long term. There are no changes made in interest. However, the fixed interest rate remains the same at the time of home loan sanction.
The benefit of a fixed interest rate on a home loan is that interest remains fixed during the loan tenure. So, there is no need to worry about the frequent fluctuations in interest on your home loan.
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Floating interest rate
Floating home loan interest rates are subjected to prevailing lending rates based on several factors, such as lender response to policy and RBI. The benefit of a floating interest rate is that the interest charged by the lender is based on the prevailing interest rate.
Keep in mind that floating interest rates are cheaper than the fixed interest rate on homes long for the long term.
Factors affecting the home loan interest rates
Many factors affect home loan interest rates. Here is the list of factors that affect the home loan’s interest rates.
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The loan amounts
A home loan’s interest rate is also determined by the amount you borrow. You are more likely to pay low interest on a larger home loan.
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Loan Type
The home loan interest rates are also based on the loan type that you get. A loan like a home purchase loan is available at the standard rate, whereas a home improvement loan attracts a high-interest rate.
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Employment
Salaried employees can easily get a home loan at low-interest rates than the self-employed. It means the lenders have different interest slabs for self-employed and salaried individuals.
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Loan tenure
Once the lender decides on the home loan’s interest rate, they consider the loan tenure. If you take a long-term home loan, the interest rate is lower.
Conclusion
Even though there are many benefits of taking a home loan, as the borrower, you must consider the interest rate applicable to your home loan.