All About Mortgage Interest Rates

In the recent monetary update held on 5th February 2021, the Reserve Bank of India kept the repo rate unchanged at 4.0%. This reduced repo rate is currently allowing the financial institution to offer loans at a considerably low interest rate. 

Consequently, this has become a favorable time for borrowers who are willing to avail of big-ticket mortgaged loans as they can now enjoy the lowest interest rates of about 8-11%. 

Interest rates determine the affordability of a loan. Hence, it is wise for borrowers to check and review the rate of interests and EMIs of various financial institutions using a calculator for mortgage loan to make an informed decision. 

Furthermore, several other factors affect the interest rates of loan against property, and borrowers must learn to avail further benefits.

Four factors other than repo rate which affects property loan interest rates

Here are four factors that put a considerable impact on property loan interest rates – 

  • Credit score

This is one of the foremost determinants of LAP loan interest rates. Financial institutions usually offer competitive interest rates to borrowers who have a credit score above 650 as it depicts his/her creditworthiness.

On the other hand, a credit score below 650 indicates high lending risk and can cause the lenders to charge a high rate of interest.

In fact, credit score affects loan against property eligibility as well and can also lead to rejection of the application.

  • Profile of the borrower

Borrower’s profile also determines mortgage loan interest rate. This includes factors like age, occupation (i.e. salaried employee or self-employed), monthly income, place of residency, etc.

Generally, financial institutions charge a low rate of interest on loans to salaried individuals as they have a stable source of income.

On the contrary, self-employed individuals generally bear a higher interest burden. Furthermore, this criterion may vary across various financial institutions and can be easily checked with a mortgage loan calculator available on the website of respective lenders.

  • Property to be mortgaged

The mortgage loan interest rate is also determined by the type, age, location, and condition of the property, which a borrower wants to pledge as collateral. For example, the commercial or industrial property will lead to a distinct form of interest accrual when compared to interest charges on residential properties. 

Furthermore, new properties located in prime locations, which have high-resale values will fetch lower interest rates than those located in less popular localities. 

  • Loan tenor 

Loan tenor or the time for which you will avail of the LAP loan also affects the rate of interest and also the monthly EMIs. Generally, lenders charge high-interest rates for short tenor and vice versa. Borrowers should be prudent while picking the tenor as it will impact the regular EMI that has to be paid each month without fail. 

A mortgage loan calculator proves extremely beneficial in this regard as it allows formulating adequate financial planning to pay off the EMIs without any default.

Borrowers must also seek pre-approved offers provided by financial institutions on home loans, loan against property and more. These offers ensure speedier and hassle-free approvals.

Individuals can check their pre-approved offers online by submitting basic details, such as name and contact number.

Now that you have learned about factors that affect interest rates and the benefits of calculating probable EMIs with a loan against property calculator check out the documents needed to apply for a loan against property for an informed decision.

Additional Read: A Complete Guide on How to Calculate Home Loan EMI

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