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6 crucial factors that impact a home loan interest rate

Top home loan strategies to follow before submitting the first application

by Ragini Salampure

In our work-life years spanning over 2-3 decades for most people, one of the most important life goals we aim to achieve is owning a home someday. Amidst the continuous quest to realize the dream of owning a home, most homebuyers require a Kotak Home Loan to take a step forward and get closer to this dream. From deciding the location of the property to zeroing in on a suitable lender, homebuyers need to practice due diligence at various decision points in order to strike the right deal for both property and home loans. And a rejection or difficulty faced in any of these steps can take you a step backwards in the journey of owning a home.

Here I will explain six strategies home loan borrowers, especially first-timers, can follow to ensure they strike the best home loan deal along with the best Kotak Home Loan Interest Rates:

Try contributing a bigger down payment

The ratio of the property’s value financed by the lender is also known as the LTV ratio. The final LTV ratio for the Kotak Home Loan is dependent upon the lender’s credit risk evaluation of home applicants. Hence, home loan applicants should initially aim to first accumulate the minimum requirement of10%-25% of their property’s value in order to make sure they are financially adequately prepared for availing of home loans.

Given that contributing a higher down payment reduces the credit risk for home loan lenders, home loan applicants making higher down payments tend to have higher chances of home loan approval. Some banks or lenders also offer lower interest rates to those opting for lower LTV ratios. Hence, home loan applicants looking to reduce their interest costs should aim at creating bigger corpuses for their home loan down payment. However, amidst the efforts to create this corpus, do not end up compromising on your emergency fund. Avoid disturbing your investment corpuses as well, which are earmarked for achieving crucial financial goals. Otherwise, striking a financial emergency or arrival of maturity of important financial goals can push you towards availing of high-interest cost loans.

Examine your EMI affordability

Most of the time, home loan lenders take into consideration the home loan applicant’s repayment capacity while evaluating the received application. Broadly saying, most banks and HFCs tend to generally prefer lending to applicants having total EMI obligation (inclusive of the expected EMI for a new home loan), remaining within 50%-60% of their net/gross monthly income. Those breaching this mark tend to possess lower chances of getting their loan approval or might be charged slightly higher Kotak Home Loan Interest Rates. Therefore, applicants’ whose EMI obligations exceed this limit can try to lower their existing loan EMI repayment obligations by prepaying some of their current loans. They can even opt for a longer tenure of home loan and/or make a higher down payment to boost eligibility.

Kotak Home Loan applicants can additionally take the assistance of online home loan EMI calculators to arrive at their suitable EMI amount based on their repayment capacity. Upon applying for a home loan, post identification of optimum EMI would thus, lower the chances of defaulting on EMIs in the future during the repayment tenure.  

Factor in home loan EMIs in your emergency fund

Any day in our lifetime, the arrival of financial exigencies or income disruptions due to sudden job loss, illness, disability, etc., can strike any time and adversely impact your loan repayment capacity. Failing to timely and regularly repay Kotak home loan EMIs on time can then cost you hefty penalties and reduce your credit score. While the option to liquidate your existing investments for repaying your home loan EMIs may be available for investors, doing so can adversely affect your long term financial health. Hence, to ensure timely repayment of your home loan EMI during financial emergencies, including in your emergency fund 6 months’ EMI obligation of your expected home loan.

Compare home loans offers from multiple lenders 

Various features like Kotak Home Loan Interest Rates, applicable processing fees, loan repayment tenures and other associated costs can differ for a varying set of applicants and/or different lenders, based on their the evaluation of credit risk of home loan applicants. So, it’s always prudent to compare maximum lenders to the extent possible before finalizing on any specific lender. Nowadays, many lenders may tend to also offer preferential rates or better service terms to their existing customers; prospective applicants can ideally first contact the banks/NBFCs with which they already have some form of the existing consumer relationship. Making such a comparison of existing and prospective lenders will allow Kotak home loan applicants to find the best home loan available with the lowest interest rate, suitable loan repayment tenures and apt loan amounts.

Review your credit score before applying

A credit score is amongst the first and foremost filters taken into consideration by lenders while evaluating your home loan application. A good credit score, considered usually to be 750 and above, can provide an uptick to your loan eligibility and even fetch you lower Kotak Home Loan Interest Rates. Hence, it is always prudent to review one’s credit score before applying for home loans. This habit also enables those having lower or no credit scores to take the required corrective measures to build/ improve it and then, later on, apply with an improved and good credit score. 

Moreover, another vital step is to develop the habit of time to time reviewing credit reports too every month. This habit would allow you sufficient time to make corrective efforts, if required, to improve your credit score and get the errors/discrepancies (if any) rectified at the earliest by the bureau.

Loop in a co-applicant to boost eligibility

The big-ticket size of home loans often makes it difficult for individuals to single-handedly get it approved. Insufficient income, low credit score, high total EMI obligations, etc., are some of the common rejection reasons for many home loan applicants. Such borrowers can submit an application with Kotak home loan upon boosting their loan eligibility and approval chances by lopping in a family member as co-applicant(s), preferably those with stable income and good credit score. Besides boosting your loan approval chances, adding a co-applicant can also increase your eligibility for a bigger loan amount if required. Moreover, looping in female co-applicants can additionally fetch you better Kotak Home Loan Interest Rates, given that many other lenders too offer concessional rates of usually 0.05% (5 bps) to female borrowers.

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