5 Ways You can Negotiate for a Good Housing Loan Interest Rate
It is only natural to want to get the best home loan interest rate when you decide to apply for housing finance. This helps you save money that you would pay as your total interest and may reduce your repayment tenor too. In order to compare the impact of interest rates on EMIs, you can use a simple tool like the online home loan calculator. Just enter your loan amount, tenor and interest to see the EMIs and the total amount of interest due on your home loan.
Apart from choosing the right lender, take a look at the ways in which you can negotiate for a lower interest rate to maximise your savings when it comes to housing finance.
Know your Lender's Preferences
It is likely that a larger loan amount results in a lower housing loan interest rate. Also, it is common for lenders to offer you a better rate if you are borrowing a sum less than 80% of the property value. So, research your lender’s eligibility criteria, preferred customer profile, and past offerings to see how you can negotiate better. This will help you ask for a better rate of interest armed by facts.
Avoid taking on Additional Loans
It is wise to reduce and even pay off any existing loans before you apply for a home loan. Not having any existing financial commitment displays an increased capacity to repay the amount due on a lengthy loan like the home loan without any default. By clearing off your old dues and not letting loans pile up, you can receive a competitive interest rate from lenders. Moreover, this will represent a healthy debt-to-income ratio.
Stretch your Interest Rate Reset Period to your Advantage
If your home loan comes with a reset clause then that means your lender can alter the interest rate on your loan as per a timeline specified at the beginning of the loan. The reset clause is valid only on mixed interest rate home loans. So, you can negotiate and stretch the number of days or months after which your fixed or floating rate may be changed.
Increase your Down Payment
Increasing your down payment can also get a more nominal interest rate. This satisfies lenders that you can repay the borrowed amount on time as you are financially disciplined and gives them more value for the money lent to you. You can do this easily by saving up for the down payment in advance, so when the times comes you have the money you need ready with you.
In case you are already repaying a home loan and negotiating better interest rates with your existing lender seems like a bleak possibility, look for the best home loan interest rate available in the market to switch your loan. When doing a home loan balance transfer, ensure that the amount you save is substantial as there are fees and charges involved. Find out if your new lender offers you additional benefits when you choose to refinance your home loan such as top-up loans or a longer tenor as well.
By following these tips, you can negotiate the best home loan deal for yourself. Apply for a home loan only after comparing varied offerings. However, when applying for the loan, keep all the necessary documents required for the home loan handy. You can get a fair idea about this by checking your lender prerequisites and terms of application.