How to Get a Low-Interest Mortgage Loan

A mortgage loan is a type of loan offered against an immovable asset, like a residential or commercial property. As compared to other types of loans, these loans not only provide the benefit of long-term repayment options but also come with lower interest rates than the others. These loans are preferred when large funds are required for business or personal expenses. Mortgage loans are secured loans in which the borrower pledges their property as collateral for the funds.

Factors That Affect the Mortgage Loan Interest Rates

Mortgage loans are high-value loans and if the borrower is unable to pay the loan back in the stipulated tenor, the ownership of the property is transferred to the creditor. So, a borrower will always look to get mortgage loans at lowest interest rate so that they are able to pay back the loan amount smoothly.  So, borrowers look for lenders offering lower interest rates on these loans. Even saving a fraction of a percent on your interest rate can save you thousands of rupees over the life of your mortgage loan, so it definitely pays to prepare, research, and compare offers before availing of a loan. But, how to get a low-interest mortgage loan or loan against property? Following are a few tips:

Research and Compare the Deals Offered  

You wouldn’t buy anything new without first taking a look at a few options. You will go online, research, and talk to people to get details on pricing and what is included. Well, the same goes for getting a mortgage loan. If you want the best loan at the lowest interest rates, you have to shop around. Do thorough research to be able to avail of the best mortgage loan interest rate deal and the lender.

High Credit Score 

The CIBIL Score or the credit score of the borrower plays an important role in determining the eligibility factor for a loan against property and the interest rate for it. It shows the creditworthiness of the borrower. A credit score of 750 to 900 is considered a high score and gives confidence to the lender about the loan repayment ability of the borrower. However, a low credit score identifies the borrower as a high-risk applicant, and as a result, the lenders charge a high loan against property interest rate on the debtor. Thus, maintain a good CIBIL score for lower interest rates on mortgage loans.

Property to be Mortgaged  

Loan against property interest rates are influenced by the property that will be mortgaged. The lender looks into the property type – commercial or residential, location, age, value, surroundings, overall condition, and its market value. The loan against property interest rate is different for both commercial and residential properties as they both have different values and nature. Old and worn-out properties will have a higher interest rate compared to new buildings in excellent condition. So, choose the property to be used as the mortgage loan collateral carefully to avail of lower interest rates.

Profile of the Applicant  

The applicant’s, age, occupation, monthly income, etc., also impact the interest rate on mortgage loans. An applicant just a few years away from their retirement will be charged higher interest rates and EMI for a shorter tenor, while younger salaried people with stable jobs will get better deals on interest rates and loan tenor. Self-employed applicants are also charged higher rates of interest rates by lenders as their income is irregular. Thus, your job and income status also decide the rate of interest for mortgage loans.

Increased Down Payment

Remember most financial institutions and banks finance a maximum of 75% to 80% of the total value of the property. The borrower will need to contribute at least 20% to 25% of the remaining cost. However, it would be much better if you paid more than the least amount from your pocket as a down payment. The higher you pay initially as the down payment, the lower will be the loan amount, which will also reduce the interest on the loan you must pay. More down payment, thus, helps to decrease the interest on loans against property.

Shorter Loan Tenor  

Loan tenor also affects the interest rates for mortgage loans. The tenor is the number of years in which the borrower has to pay back the loan. Most tenors are 15, 20, or 30 years. The longer the tenor for the loan, the higher the risk, resulting in higher interest rates. Thus, loans with longer tenors have lower monthly payments because the EMIs are spread out over a longer time. So, short tenor loans come with lower interest rates and you can save funds for future prepayment purposes.

Summing Up

An understanding of the above-mentioned factors can help you get a mortgage loan at lower interest rates. A low mortgage rate can make your monthly payments more affordable and save you interest charges over the tenor of your loan. So, prepare your finances early and shop around for the best lender and a low-interest mortgage loan for easy repayment. Refinancing may be another option for you to get low rates of interest on mortgage loans. 

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