When one wants to buy properties like apartments in Chennai, the most viable option is to avail a home loan. Houses are expensive and taking a loan will ease the burden on your financial commitments, but the loan in itself is a long-term commitment too.
There is a sizable interest levied on the home loan principal amount. This interest rate depends on several factors. This also decides what your monthly EMI will be. Let us brief you on each of them.
The rule of thumb is higher the loan amount, the higher the interest rate. So, even if you are eligible for a high value home loan, it is wise to borrow just enough to cover what you need. Assess your needs and down payment capacity before settling on how much you are willing to borrow. Negotiate the interest rate with the lender, based on this principal amount.
The home loan repayment on apartments in Chennai can be as long as 25 years. However, choosing the shortest repayment tenure will help you attract smaller interest rates. The EMI might seem bigger, but saving on the interest rates will save you a considerable amount in the long run. When you extend your EMI tenure, your EMI may become less, but the higher interest rates will accumulate to an overall larger value. Make use of the home loan calculator on the lender or developer’s website to get the best value out of the tenure. Don’t forget to keep in mind your ability to cover the EMI amount each month as you don’t want it to become a strain on your finances.
There are several types of interest rates offered by lenders.
Floating interest rate:
Floating interest rates keep fluctuating according to the norms released by the RBI. It is a gamble as the RBI can both reduce or increase the interest rate. Consequently, your EMI would decrease and increase too. To choose the floating interest option, you will need to have at least a vague idea of the market to gauge how the trend would go.
Fixed Interest rate:
The fixed Interest rate will remain the same throughout the period of the loan repayment tenure. This can be beneficial or put you at a disadvantage if the interest rates are reduced by the RBI, which will not reflect on your home loan. Alternatively, you can ask the lender to let you choose fixed interest rates for an initial period like 2-3 years and then switch to a floating interest rate for the latter years. This allows you to find a balance and get the best value out of both interest rate types.
The credit score is a crucial aspect of the home loan and any investment process. You need to maintain it above 725. Anything below that will lead to the application getting rejected. Before you apply for the loan, get your credit score checked.
The lending institution will check your credit history, credit score, and your general financial habits. This helps them determine if you have the capacity and integrity to repay the loan on time every month. Low Credit scores can land you a higher interest rate. So, build a high credit score to avail lower interest rates.
Loan-to-Value ratio is the percentage of home loan taken to the actual selling value of the property. If this ratio is high, then the interest rates and EMIs are high too. When the LTV is low, it means that you are already prepared to pay a larger amount out of your own pockets. In this case, the lenders offer a lower interest rate.
The lenders need to verify if you are actually capable of repaying the loan. Salaried people, and those working for the Government and reputed corporations find it easier to avail a home loan. A stable income also attracts low interest rates. People running their own business or working as consultants, with fluctuating income have a harder time getting their loan applications approved.
The reputation of the co-applicant also influences the interest rates. Having a Co-applicant sign with you, makes the lender reduce the interest rate, as they are assured one of the applicants is responsible to pay the loan even if the other forfeits.
Lifestyle Housing is a reputed developer of apartments in Chennai. We offer 2 BHK and 3 BHK flats in Porur at attractive rates. Our real estate experts and lending partners will help you arrive at the best interest rates for your home loans.