Things You Need To Know About Interest Rate
If you are buying a house, you might have researched about home loans and interest rate as well. Interest rate is a part of the loan that is charged as the interest to the borrower, expressed as an annual percentage. Usually, buyers miss crucial information and facts about interest rate which is imperative to be understood before signing the mortgage deal with the lender.
Here are some facts that you should not miss about interest rates:
- You can negotiate interest rates
You can negotiate your interest rate with the bank before applying for the loan. Shop around, research about the lenders and their policies before bargaining the cost. Do your homework well and convey your case and deals you are getting from other lenders. However, you need to have a strong CIBIL score to get the bank to sign the deal on your terms.
- EMI remains same even if interest rate changes
If the bank decides to pass on the benefit of lower base rate to the consumer, even then the EMI remains same. The lender increases the principal component per EMI which is of a great benefit to a buyer as he can save almost 10-12 EMIs in the total duration. More the principal amount you pay, lesser you will be burdened with the mounting interest component over a period of time.
- Your CIBIL impacts the interest rate
On an average, buyers with CIBIL score of 750+ have good chances to get approval from banks for the home loan. They usually get up to 80 per cent of the property cost as the home loan at an interest rate of 9-11 per cent. However, if you have a CIBIL of less than 700, the rate of interest would vary from 11-15 per cent. If you have applied for the loan against property, the interest rate can go up to 18 per cent. This is valid only for secured loans like the home loan. For other unsecured loans, the interest rate can be as high as 26 per cent.
- Banks can change interest rate after a duration
The agreement you sign with you bank have a reset clause which allows banks to change the interest rate at their own will after a duration of two-four years. If you have applied for floating rate, the bank can review the interest charge every quarter. Since fixed rate is a little higher than the floating rate, there are few lenders which offer fixed rate for a fixed duration and can realign the interest rate as per the current market situation.
Home buying has never been a simple process but home loans have made it financially viable. Banks are the most trusted source to check whether the project you are buying is legally feasible and have all approvals in place. However, before signing the deal do check with the experts, as to which lender is offering the most irresistible deal. This will ease the pressure on your pocket.