How to Negotiate Interest Rates for Your Home Loan

Home loans give you easy comfort in building a home. Home loans provide long repayment terms that impact on total amount. So, Negotiating interest rates is one of the ways to save your money.  As a home loan is a secure loan, you should follow tips and tricks to negotiate interest rates for your home loan.

Understand the Facts

Borrowers should understand the facts that influence your home loan interest. Let’s drive on the factors:

Borrower Credit Score: A decent credit score can build the borrower’s trust, which helps you get lower home loan rates. But if your credit score is bad, home loan interest may increase.

 LTV Ratio: Lenders calculate the LTV (Loan-to-Value) ratio that represents the loan amount compared to the property value. The LTV ratio should be lower to get an affordable rate on your home loan.

Depend on Market: Economic conditions depend on market conditions such as inflation, economic health, and RBI monetary policy.

Repayment Term: If the borrower takes a short loan term, generally interest rate will be low compared to long repayment tenure.

Negotiate Interest Rates for Home Loan

Now we will explore the tricks to negotiate home loan interest rates. Apply this technique to reduce home loan EMI.

1. Research and Comparison

• Research various lenders for cheap interest rates on home loans.
• Access the EMI Calculator or comparison tool to get affordable rates and fees.
• Don’t depend on lender rates; you should inquire to get additional discounts.

 2. Improve Credit Score

• Borrower creditworthiness is the umpire of the match that gives you a cheap rate.
• Improve your credit score before getting to home loan.
• Pay existing loans, and on-time credit card payments, and maintain a healthy CIBIL score.
• You can improve your negotiation power if you have a good credit score.

3.  Pre-approved Offer

•  You should consider a pre-approved home loan offer.
• Check pre-approved offers through lender applications that offer cheap ROI (Rate of Interest).

4. Leverage Multiple Offers

• Approach multiple lenders and take advantage of cheap interest.
• Lenders like SBI, Central Bank of India, ICICI Bank, HDFC Bank, and Axis Bank offer lower rates compared to other financial companies.

5. Apply Floating Rates

•  Generally, lenders offer fixed interest rates but you should take floating rates.
• Research the market before going with floating rates because of market fluctuations.

Also Read: Make Dream Home at Home Loan

6. Existing Bank Relation

• Previous bank relations in the form of savings accounts, or FD accounts can help you.
• An existing bank customer has the advantage of decreasing the interest rate.
• Use your negotiating power and get a cheap home loan rate.

7. Higher Down Payment

• Higher down payments easily decrease your overall loan amount.
• Your home loan interest will go down if pay at least 20% – 30% of the property value.

8. Take Short Tenure

• Short loan tenure plays a vital role in the match.
• You can save more money if you pay within the short term. But the EMI amount will be high.

FAQs