For most of you, the biggest purchase you will ever make is perhaps your house. The cost of your house is determined to a large extent by the Home Loan interest rate. Hence, before you lock into your home loan, understand some of the factors that may help you in securing a better interest rate from your bank.
Tips for negotiating better Home Loan terms
Do your research
Every lender offers different Home Loan interest rates and tenures. The first step would be to compare the base interest rates offered by different lenders. This way, you can get an idea of the best interest rate for your income and property and help you select the lender who offers you the terms and conditions best suitable for your budget. You can use Axis Bank's Home Loan EMI calculator and compare the EMIs and overall interest cost.
Go for a higher down payment
When you opt for a higher down payment, the total Home Loan expense goes down. When the principal amount drops, the overall interest expense also decreases. Since the principal amount is reduced, the tenure can be shortened.
Another benefit of going for a higher down payment is that it shows the bank that you are not a risky borrower. Hence, the risk premium can be lower on your Home Loan. This can influence the bank to provide a Home Loan at a lower interest rate.
Add a co-applicant
When deciding the Home Loan amount you qualify for, the bank will look at your monthly income. If the bank concludes that your income is too low for the Home Loan you are seeking, they might offer a loan with a lower amount. In some cases, the bank might even outright reject your application.
However, when you add a co-applicant, the monthly incomes of both you and your co-applicant are considered. So, the bank will be comfortable lending you a higher amount as a Home Loan, as it will be the liability of two individuals rather than one.
Highlight your financial stability
Think from the perspective of the bank. It receives deposits from individuals and companies. These deposits are then used to give out loans. If borrowers end up defaulting, it will be difficult for the bank to let its depositors withdraw their own money. Thus, banks prefer borrowers that are unlikely to default.
You can show your lender that you are financially stable by drawing their attention to your strengths. These include having a high-security job or having healthy spending habits that allow you to amass savings over the years. This could help you influence the bank to believe you are a safe borrower.
A healthy credit score with low credit is the sweet spot
A credit score is a three-digit summary of your credit history. It is calculated based on the amount of money borrowed and how regular you are with EMI payments. Credit scores range from 300 to 900, with 900 being the best score you can achieve.
Having a high credit score shows that you are a responsible borrower. You should ensure that you do not have a lot of active EMIs when you are applying for a Home Loan. Since Home Loan EMIs can go up to 60% of your monthly income, banks are more comfortable lending to people who do not have a lot of their income being spent repaying multiple EMIs.
Also Read: [Can Home Loans be offered on the cost of the property?]
Conclusion
If the bank is convinced that you are financially stable and in a position to service your loan regularly, your home loan application approval should be smooth. To that end, be transparent with all your paperwork and documentation when applying for the loan. Don’t misrepresent facts regarding your own income or salary or your property details. These factors also contribute towards securing a home loan easily.
Consider applying for Axis Bank Home Loans, which offer amounts as high as ₹5 crore for tenures spanning up to 30 years. With competitive interest rates and quick disbursals, Axis Bank can be your trusted partner for building your dream home.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision
