Mortgage loans are a type of secured loan in India that you can apply by keeping your own property as the collateral to the lender.
In turn, the financial institution provides you with a large loan amount depending on the value of the property and other factors.
Since its secured loan, lenders charge affordable mortgage interest rates. This way, you can pay cost-effective EMIs and manage other expenses easily.
If you want to apply for the same and want to know the current mortgage loan rates, then this post is for you!
Current mortgage loan rates at a glance
The current mortgage loan rates range between 10% and 12%. The exact applicable rate of interest may vary from lender to lender.
If you wish to prepay some amount during the tenor of the loan, then you can do that. But lenders charge some pre-payment charges, which could be 2% + applicable taxes. And this figure may vary from lender to lender.
On the other hand, the mortgage loan charges towards foreclosure could be 4% + applicable taxes, and it may also differ from creditors to creditors.
What factors determine mortgage loan rates?
Mortgage loan rates that lenders offer you is dependent on many factors. They are the Loan to Value ratio of your mortgaged property, credit score, and much more. Let’s take a look at the key elements that lead to mortgage loan rates for a borrower!
- Type of property that you wish to be mortgaged
The kind of property that you are willing to keep as the collateral plays a vital role in gauging the mortgage loan rates. The rate of interest may vary for commercial and residential properties. It is because they have a different value. What’s more, the condition, age, locality and the surrounding infrastructure might alter the final rate.
- Your credit score
Your credit score is one of the crucial parameters that lenders look up to while determining the mortgage loan rates. If you have managed to maintain a cibil score of 750 or more, then you can avail an affordable rate on your upcoming mortgage loan. You can improve and maintain a higher credit score by paying off your credit card outstanding and ongoing loan EMIs on time and without defaults. On the other hand, if you happen to have a lower credit score, then you may be counted as the high-risk borrower. It is because your lender may assume that you might default on the loan EMIs. In turn, you may be awarded a higher mortgage rate. In some cases, renowned creditors may not approve your loan application if you have a poor credit score in the first place.
- Your overall candidature
The age, city of residence, occupation and monthly income of the loan applicant may affect the final mortgage loan rates being offered to you. If you are salaried and about to retire, then the lender may charge higher mortgage loan rates. On the other hand, someone who is early in the job may get an affordable rate. The basic concept behind it is that the person about to retire has got less working years left. Hence, he may not have a regular source of income and may default. Also, the rate of interest for salaried will be lower as their income is generally fixed. For self-employed, it may be higher since their income is inconsistent. If you also don’t meet the eligibility terms and don’t furnish all mortgage loan documents, then your loan application may be rejected. Even if it gets approved due to property’s good LTV, the lender may charge you with higher mortgage loan rates.
- The tenor of the loan
The loan tenor is another important factor that determines the mortgage loan rates and the EMIs that you will pay. Since a mortgage loan is a long-term financial solution, you may have to pay EMIs for years. The shorter is your tenor, the higher will be the EMIs but you will pay lower interest. It is compared to someone opting for a longer tenor with a lower EMI amount but higher interest payouts. Even though the mortgage loan is secured by collateral, your lender may still ask for a higher rate if you go for a smaller tenor.
You are now aware of the current mortgage loan rates and aspects that determine it. You can now assess your condition before applying for the same and get an affordable interest rate.