House loan interest can determine your loan eligibility.

Posted by Anurag Mishra on July 19th, 2017

Whenever we talk about home loans, the home loan interest rate often establishes itself to be the determining factor for your taking the loan and for financers giving the loan. Your EMI affordability determines your home loan eligibility; as it depends on your monthly income. And the EMI comprises of the principal loan amount, interest rates and loan tenure. The financers can give you the money only when they are sure of your capability to carry the loan term smoothly as a borrower. When we think about the home loan interest rates we are stuck to only the types, but there are various other factors that rotate around the interest rates.

The lowering house loan interest has opened the door for more potential borrowers; as with lower monthly income they can afford the reasonably lower EMIs. Lowering rates are acting as catalyst for the potential property buyers as it has increased the affordability of the borrowers with higher monthly income to invest in properties with higher budgets. In short the lower interest rates are giving scope to majority of people from the middle class strata of the society to purchase their own home in this era of expensive properties. For the existing borrowers these lowering rates are giving them the scope either to increase their EMI & lessen the tenure, or helping them to save the extra amount from past higher EMI for the future as the EMI decreases with lowering of interest rates.

The home loan interest rate figures that summoned you to take the home loan may not be the same when you actually get the loan approved. Financers decide the rate which would cover their operating cost & profit share. Other than this, various factors affect the rates like the credit score of the borrower and the job profile of the borrower also affects the rate.

The credit score that reflects your spending habit, it acts as a testimony for you as a borrower on which the financer can trust on or not. It also determines the rate of interest figure, if the points are less than 700 then the interest rate climbs higher. If your score is nearer to the 900 mark then you can get lower rates available.

If you are a salaried or self-employed person, chances are there that you can get lower rates by fulfilling other criteria. If borrower is working in an unorganized sector then his interest rates would automatically go up.

Now the most important factor, the nature of interest rate can decide home loan interest rate. There are three kinds of interest rates: fixed, floating and combination of both fixed & floating rate of interest.

In fixed rate of interest the borrower has to pay the same rate for their whole loan tenure, though they enjoy stability in their monthly budget, but they cannot enjoy the lowering rate benefits. In the present situation with the adjustable rate borrowers enjoy the lowering rates; the fixed rate borrowers’ budget would not be affected.

In floating or adjustable rate the rates fluctuate depending on the market condition and government policies. The last one is the combination of fixed & adjustable rates, the borrowers have to pay their loan amount at a fixed rate for a committed period of time after that it switches to adjustable rate.

More you save, more you earn and more you enjoy the benefits of a house loan interest.