When you apply for a loan, the first thing that concerns you is the interest rate. The interest rate of a loan significantly impacts your budget—the higher the rates, the lower the savings.
Scroll down to know more about the measures you can take to minimize the interest rate burden of loans, like a mortgage loan.
Mortgage Loan Interest Rates in Brief
Mortgage loan interest rates are among the lowest loan rates you can get in the market.
Since lenders approve a mortgage loan against collateral, their risks are minimal. Hence, they offer these loans at a relatively lower rate than most other loans.
Mortgage loan interest rates are fixed or floating. A fixed-rate mortgage loan is the best during a rising-rate regime.
Choosing this interest type ensures that your EMI remains immune from rate hikes. In contrast, the floating rate will be your best bet in a falling rate regime.
As the rates in the market reduce, your lender will most likely pass on the discount to you, and hence, you can save more.
Hence, choosing the right interest type often plays a crucial role in determining your savings.
Besides the interest type, other factors that influence mortgage loan interest rates are as follows:
1. Credit Score
The borrower’s credit score affects mortgage loan interest rates, loan term, eligibility, and the loan amount.
A score of 750 or more is considered the benchmark. The lower the credit score, the higher will be the interest rate.
Hence, if you want to receive the best mortgage loan interest rates, you must take steps to increase your credit score.
2. The Lender
The lender plays a decisive role in fixing the rates. Some lenders display ultra-low rates to lure borrowers.
However, the actual rate might be higher. Moreover, they may levy higher application fee, processing fee, or prepayment charges.
Hence, if you want to get the best mortgage loan interest rates, you should choose a lender with a solid financial track record.
PNB Housing Finance, for example, has a legacy of over thirty years and displays its rates on the website. With such transparent lenders, applying for a mortgage loan becomes a blissful experience.
Since mortgage loans are extended-term loans, borrowers often prepay them before the term-end. Loan prepayments can decrease your loan burden and make you debt-free faster.
However, the prepayment penalty varies widely among lenders. While some lenders impose a 1% fee, the fee can go up to 4%.
Hence, before applying for a mortgage loan, you must also check the foreclosure charges to reduce the financial obligation.
4. Professional Credentials
The borrower’s professional credentials, like income and its stability and the organization’s reputation, affect mortgage loan interest rates.
It is commonly found that high-profile corporate executives or government officials get better rates than others.
Hence, if your professional credentials are robust, you can negotiate with the lender for better rates.
Choosing the best mortgage loan interest rates is easy when you know the tips mentioned in this article. Try to maintain a steady relationship with your lender since they often offer discounted rates to loyal customers.