Navigating Mortgage Loan Interest Rates: What You Should Know

In India, the term mortgage loans is considered synonymous with loans against property or property loans or home mortgage loans. Therefore, in this article, we will focus on property loan interest rates and cover everything loan applicants must know about this topic. So, read on. 

Everything You Need to Know About Mortgage Loan Interest Rates 

Types of Interest Rates 

Property loans or loans against property are loans availed of by pledging a residential or commercial property as collateral. Low mortgage loan interest rates, long repayment tenor, and substantial loan amount are some of the reasons why loan borrowers opt for these types of loans. 

If you are planning to avail yourself of a loan against property or property loan, know that you will be given the option to choose from two different interest rate types: fixed and floating interest rates. In fixed-interest rate home mortgage loans, one has to pay the same EMIs through the tenor of one’s loan as the interest rate in the case of these loans does not change with changing market conditions.

On the other hand, in the case of floating interest rate home loans, the mortgage loan interest rates change to match changes in external market conditions. Budgeting and planning are easier in the case of fixed-interest rate mortgage loans. However, floating interest rates tend to be cheaper. One must choose the interest rate type after thinking things through. Some lenders may also offer to extend you a home loan on a third interest rate type: hybrid interest rates. In these types of loans, the interest rate remains fixed for the first few years and then it automatically changes to the floating interest rate type. 

Factors that Affect Mortgage Loan Interest Rates

Availing of a mortgage loan at the lowest interest rates possible is crucial to ensure loan feasibility and ease of repayment. If you wish to avail yourself of low mortgage loan interest rates, understanding the factors that affect mortgage loan interest rates is crucial. Here are the factors that affect the rate of interest you will get on your loan against property. 

1. Credit Score: A credit score above 750 is considered the mark of a credit user who can be trusted with timely repayment of loan EMIs. Therefore, loan applicants with credit scores between 750 and 900 are offered the lowest mortgage loan interest rates as well as other favourable loan terms and conditions. 

2. Quality of the Collateral: Mortgage loans are loans backed by collateral. Therefore, the quality of the collateral is important. High-resale value collaterals help borrowers avail of better or lower interest rates than low-quality collateral with low resale value. 

3. Job and Income Stability: Even though mortgage loans are loans backed by collateral or security, the income and job stability of the loan applicant play a key role in ensuring one gets extended the best loan terms and conditions. Individuals planning to apply for a property loan must not switch jobs often. 

4. LTV Ratio: The LTV ratio is the ratio of loan value to the total value of the property. High LTV ratio loans involve a high loan amount and thus, the chances of a loan default are also higher in the case of high LTV ratio loans. Therefore, lenders generally charge higher mortgage loan interest rates on high LTV ratio loans against property.

5. Loan Tenor: Opting for a loan tenor helps keep EMIs feasible and therefore, the chances of a loan default on a lower side. It is thus that when borrowers opt for a long tenor, lenders generally charge a lower rate of interest. 

Final Words 

If you are planning to apply for a mortgage loan, we recommend that you use a property loan EMI calculator for repayment planning. This online handy tool allows borrowers to calculate the loan amount and loan EMIs they can comfortably afford. Hence, the calculator protects them from loan defaults and other penalties. 

Further, loan applicants must also check their loan eligibility. This is crucial to ensure that you get extended the best loan terms and conditions. Lastly, build a credit score above 750, maintain income and job stability and pledge high-quality collateral to establish candidature for the most beneficial loan terms and conditions.