The current average property rates in Kolkata ranges somewhat between Rs.4500 and Rs.8000 per sq. ft. While areas like Central Kolkata and South Kolkata always record highest property rates, in current times, real estate price rates for North Kolkata and regions around Dum Dum have also increased considerably. Purchasing properties amidst such rising prices proves to be an extremely costly affair.
Under such a circumstance, home loans have become the ideal way to finance a home purchase. In the following sections, you will learn some important factors that you must keep in mind to avail home loan in Kolkata at a lower interest rate.
5 factors that impact interest rates of home loan in Kolkata
While availing of a housing loan, borrowers must ensure that the interest rates are as minimal as possible, as otherwise, it can increase the equated monthly instalment amount and consequently their debt burden.
Borrowers searching for how to apply for home loans must therefore keep in mind the following factors to secure affordable home loans at lower interest rates.
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Credit score
An individuals’ credit score is one of the primary determinants of the interest rates that lending institutions will charge against a borrowed home loan amount. A credit score measures a borrower’s creditworthiness and influences a lender’s faith in an individual’s repayment capacity.
Therefore, poor credit scores can cause a lender to charge higher interest rates. On the contrary, higher credit scores build your credibility and give you better bargaining power to reduce the interest rates. Applicants must have a credit score of 750 and higher to secure lower interest rates.
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Location of the property
Location of the property also determines the interest rates for a home loan in Kolkata. Mostly, properties situated in better localities with proper amenities and transportation connectivity likely invites lower interest rates. This is because properties in prominent locations have a better resale value, consequently reducing lending risks for a financial institution.
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Loan quantum
The amount of credit borrowed significantly impacts a home loans’ interest rates. If the borrowed fund amount is high, lending institutions consider it as a risk. Consequently, they charge higher interest rates. Therefore, it is always wise to make a sizable down payment. By rule of thumb, individuals must at least pay 20% of the total property valuation upfront to reduce the loan amount and thereby the interest rates.
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Income stability
Home loan is a significant and long-term financial commitment. The repayment tenor can be extended to about 240 months. Lending institutions, therefore, give great importance to income stability as it allows them to assess and confirm a borrower’s repayment capacity. Accordingly, salaried individuals employed in reputed private sectors or public sectors are charged lower-interest rates than self-employed individuals.
Also, if you want to avail of a home loan without income proof, interest rates will be higher as the lending risk for financial institutions will be significant in that case.
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Type of interest rates
There are two types of interest rates available in the market: floating and fixed. While the floating interest rates fluctuate depending on the changing base rates, the latter remains fixed all throughout the repayment tenor. Generally, the floating interest rates are lower than the fixed interest rates by 1-2%.
It also allows you to enjoy the benefits of decreasing base rates. However, on the other hand, the floating interest rates increase in case of a rise in the base rates. Therefore, individuals must decide accordingly and choose the preferable interest rate option after detailed market research.
Home loan in Kolkata is the best financial solution for buying properties without straining the monthly budget. However, it is extremely crucial to check and compare the interest rates of various financial institutions and consider the above-mentioned factors to make an informed decision. Individuals can also use the home loan EMI calculator available on the website of the lending institutions to check the interest rates against a particular loan quantum and tenor to ensure affordability and avoid defaulting issues in the long run.
