Top Factors That Influence Mortgage Loan Interest Rates

A loan against property, also known as a mortgage loan, is a significant financial decision that allows the borrower to leverage their property to avail of a loan in order to meet various financial needs. While it may ease your burden, you must also know how to manage it properly because it can be overwhelming due to the interest rates involved. Ultimately, the interest rates that are payable on Equated Monthly Instalments (EMIs) are also a deciding factor in whether one can afford the loan or not.

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Factors Influencing Mortgage Loan Interest Rates

The availability of home loans offered by financial institutions such as Banks and Non-Banking Finance Companies (NBFCs) has fulfilled the dreams of many. Muthoot Finance offers a host of benefits, such as flexible EMIs to let you manage and plan your repayment over a longer tenure. By understanding mortgage loan interest rates and the unique aspects of home loan schemes, you can make a comparison and pick the one that is best for you.

The hassle for your search ends here, as Muthoot Homefin (India) Limited (MHIL), an arm of the Muthoot Group that simplifies availing of home loans. In this blog, we will go through the various factors that influence mortgage loan interest rates in India.

Factors Influencing Mortgage Loan Interest Rates

Credit History and Scores

A clean credit history without ever defaulting on loans generally means that the interest rates will be lower. The other factor is your CIBIL score, which denotes your creditworthiness. A lower credit score denotes that you are a risky borrower. Lenders consider these two factors while deciding the interest rates on mortgage loans. Your credit score is an amalgamation of your credit history, which is measured in 3 figures ranging between 300 and 900.

Location of the Home/Property

The location of the property that you offer as collateral to your lender to avail of a mortgage loan plays a vital role in determining the interest rate of the loan. A property or a home is a fixed asset that often promises appreciation in its value in the future. Lenders offer lower mortgage interest rates to borrowers whose property is in a desirable neighbourhood. Whereas properties in less desirable neighbourhoods with limited access to public amenities lead to a higher interest rate.

Loan-to-Value (LTV) Ratio

This refers to the percentage of the property’s value as the loan amount the borrower agrees to, which is offered by the lender. Lenders generally offer a loan amount of up to 60% of the property’s value. A lower LTV ratio demonstrates that the borrower is contributing a significant percentage of their property value, thus reducing credit risk, which eventually makes them eligible for lower mortgage loan interest rates.

Type of Interest

There are different options on the type of interest rates that come along with availing of home loans. The rate of interest depends on the type, which is fixed, floating, or mixed. A fixed interest rate remains constant throughout the tenure of your loan. This provides stability while making monthly repayments. Floating interest rates may change or fluctuate based on the RBI’s policy rates. Whereas a mixed housing loan interest rate is a combination of two, where the fixed rate is for an initial period of the loan, followed by a floating rate.

Employment Status

This is also an important factor that influences mortgage loan interest rates. Borrowers with a stable income source qualify for a lower interest rate as they are deemed to be less risky. Whereas borrowers with unstable income sources often have to pay higher interest rates. Salaried professionals, government employees, doctors, etc., fall into the category of lower interest rates.

Celebrate your dream of owning a home with Muthoot Homefin’s attractive housing finance options. To be able to meet the dynamic customer needs, our schemes are tailored to specific requirements. Besides, we also offer lower interest rates, quick approvals and minimal documentation. Lastly, to make it a lot easier and convenient, you can get in touch with our representative for resolutions on all queries in just a few clicks.