Housing loan is a type of credit facility that is extended to the borrower for purchase or renovation of a house. It is the most useful product offered by various financial institutions to fulfill the housing needs of the candidates who aspire to live in their own house. The candidates taking up the loan repay the principal amount along with the interest charged on it. Since people take a home loan for a longer period of time they should thoroughly check the details and compare the housing loan interest rates offered by various lending institutions to select the one that best serves the purpose.
Types of Home Loan Interest Rate:
The interest is the amount that the borrower pays on the credit availed. It is the charge that the user pays on the use of principal amount. The interest rate is expressed as a percentage of principal usually charged on an annual basis.
There are two types interest rates – fixed and floating interest rates.
Fixed Interest Rate – Fixed rate of interest means that the loan is charged at the same rate of interest during the entire tenure of the loan. The EMI amount remains same throughout the tenure.
Floating Rate of Interest– In loan charged on a floating rate of interest the EMI fluctuates during the loan tenure. The installment amount varies with the variation in the interest rate. The rate changes as per the bank’s policy and hence the interest on a loan is calculated on the new rates.
Housing Loan Interest Calculator:
Computing the interest on the loan is a hectic task. To make the calculation easy and less time consuming use home loan interest rate calculator. The calculator is an online device that helps the user in computing the correct result quickly. Using a calculator is simple as the user only needs to enter the details regarding loan amount, tenure and the rate of interest.
For Example: A candidate wants to know the home loan interest he has to pay on the loan of ₹1,00,00,000 taken for the period of 20 years at 10.50% p.a. interest rate. He uses the calculator to calculate the same. On placing the relevant details in the calculator the displayed result is as given below:
- Monthly Installment – ₹ 99,838
- Total Interest Amount – ₹ 1,39,61,117
- Total Repayment Amount – ₹ 2,39,61,117
Factors Affecting Home Loan Interest Rate:
Income – The income of the applicant is the major factor that helps in deciding the housing loan eligibility and the rate of interest. The salary or the revenue earned by the applicant during a financial year is a major concern of all the lenders. The applicants with high income get loans at an attractive rate of interest.
Credit History – Another important factor that helps in deciding the lending rate is the credit history of the applicant. The applicant having clear records and good credit score are likely to get a loan at pleasing rates.
Location of Property – Unlike other loans, in a home loan the location and the surroundings of property make much of a difference. Even the name of builder/agency you are purchasing home from impacts the eligibility and rate of interest. So, it is advisable to buy a house from the trusted builders.
Value of Property – The value of property too affects the housing loan interest rates.
To get the credit approved at the lowest home loan interest rates the user must consider the factors affecting the housing loan interest rate and before applying should compare the lending rates offered by various institutions.