Housing loans are high-value long-term credits. In this way, even a slight change in interest rates will have a profound impact on the total cost of the loan.
After the relatively weak performance of the past few years, the Indian real estate industry seems to have picked up again in 2020. As per the numbers, India’s office space saw an increase in investments. As a result, the investments rose from $1.8 billion in FY 2018-19 to $2.9 billion in FY 2019-20. Also, the home loan disbursal grew around $24.6 bn; on the other hand, net credit disbursal to real estate developers rose by $3.5 during FY 2019-20.
This bodes well for real estate agents in the country and once again emphasises the public’s confidence in the industry. More and more people invest in real estate again, mainly through housing financing options. Therefore, it is important to understand how to use the lowest housing loan interest rate. After the launch of MCLR, it is necessary to pay attention to the repo rates announced by the Reserve Bank of India every quarter. Fluctuations in interest rates will affect housing loan interest rates proportionally.
Numbers to note :
- Present Repo rate is 4.00%.
- Current reverse repo rate is 3.35%
- Current MCLR is 7.10% to 7.75%(overnight).
- Private Equity & Venture Capital investments in 2020 is US$28.9 billion.
Home loan interest rates: ways to lower interest rates
Housing loans are usually high-value and long-term credit. Even a slight change in home loan interest rates will have a profound impact on the total cost of the loan.
Take this as an example:
A 20-year loan of INR 1 crore with an interest rate of 8.5% generates a total interest of INR 1,08,27,757. If the interest rate is only increased by 0.10%, the total interest payable will increase to INR 1,09,79,905, which is approximately INR 150,000 higher than the previous amount.
Therefore, it is essential to use the lowest housing loan interest rate to reduce the burden of repayment. The following are the main techniques for lowering housing loan interest rates.
Maintain a healthy credit score
There is a widespread misunderstanding that credit scores are not as important as unsecured credit for housing loan eligibility. Although the statement has a certain degree of credibility, its interest rate has been affected as lenders are relatively loose when approving housing loans for individuals with a relatively low credit score. Lenders always charge higher interest rates to individuals whose credit score does not exceed 750.
Choose balance transfer tool.
Most lenders offer the option of transferring housing loan balances. You can use the home loan balance transfer tool to transfer the outstanding loan amount to a new lender. Choosing the home loan balance transfer allows you to avail yourself of a lower interest rate.
Obtain government subsidies for housing loan interest rates
In recent years, government initiatives such as Pradhan Mantri Awas Yojana (PMAY) and MahaRERA Act are playing a driving role in the expanding growth trajectory of the real estate sector. Especially PMAY, which greatly reduces the cost of housing loans, especially EWS and MIG categories. Under this program, applicants can receive interest rate subsidies of up to 6.50% from their housing loans for a period of up to 20 years. The maximum subsidy is from Rs 220,000 to Rs. 265,000 depending on the economic category of the applicant.
Choose between fixed and floating interest rates.
Usually, floating interest rates are several percentage points lower than fixed interest. In addition, the RBI has kept the repo rate the same for the fourth consecutive month. It is currently 4.00%, prompting lenders to reduce their floating interest rates proportionally.
Choose your lender wisely.
As different lenders charge a varying interest rate for their housing loans, you should compare the interest rates of different lenders before completing the transaction. Some lenders offer the lowest housing loan interest rates. The combination of investor participation and government initiatives such as PMAY has brought new vitality to the real estate industry in India, thus increasing the demand for housing loans. With a guide to getting better home loan interest rates, you can use it and realize your dream of becoming a homeowner.