Home loans are highly convenient financial options which help you realise the long-cherished dream of having your own house. The biggest benefit that it offers is that you do not have pay to dip into your savings and you instead repay back the loan in monthly instalments in a tenor of your convenience. This ensures that repaying back the home loan does not become a burden on your finances.
One of the most important aspects of a home loan is the interest rate. This is because it is the housing loan interest that determines the installment that needs to be paid each month and in effect, your finances too. It is thus essential to know the factors which determine the interest rates of your home loan, some of which are as follows -
This is also known as Marginal Cost Fund Based Lending Rate (MCLR). This is the minimum rate at which lenders offer loans to borrowers. The MCLR rate is determined by the RBI (Reserve Bank of India) to ensure that whenever any changes are made in the MCLR, its benefits are passed on to the borrowers.
This refers to the interest rate at which RBI lends to the commercial lending institutions. The repo rate is changed after every two months as part of the Monetary Policy measures to keep inflation in check. When the inflation rates are high, the RBI increases the repo rate to limit the circulation of money in the market.
There are some lenders who offer a lower interest rates to those borrowers who make a bigger amount of down payment. So check if this facility is available with your lender or not.
These are some of the factors which contribute towards determining the interest rate of your home loan.