Several factors affect mortgage loans on house properties. One of the most significant factors is the credit score of the applicant.
High Credit Score
Lenders generally offer lower interest rates to individuals with higher credit scores, as it reflects responsible credit behaviour and financial discipline. Individuals can consider a lifetime free Step UP Credit Card, co-branded with SBM Bank India Ltd, to improve their credit score.
Loan Slabs
Another factor that affects this is the loan amount. Many banks and housing finance companies (HFCs) fix interest rates based on loan slabs, with lower amounts usually having lower interest rates.
Property Type
The type of property offered as collateral can also impact the lap loan interest rate. Lenders may offer lower interest rates for self-occupied residential properties than commercial properties or properties that are not self-occupied.
Female Borrowers
Women applicants may also be eligible for an interest rate concession, with many lenders offering a lower interest rate to female borrowers. Roping in a female family member as a co-applicant may help avail a lower interest rate.
Loan-to-Value Ratio
Loan Value Ratio (LTV) is also an important factor to consider when applying for LAP. The maximum loan amount lenders usually offer on a loan against property is up to 70% of the property’s value. Borrowing less helps reduce the loan-to-value ratio, increase loan eligibility, and lower interest rates. Note that LTV ratios also differ by type of property.
Income and employment
Finally, lenders also consider the income and employment profile of the applicant when setting interest rates. Salaried applicants with higher job and income certainty are generally offered lower interest rates. Self-employed individuals with irregular income flows, unstable job profiles, or those who have just started their professional journey may be charged higher interest rates.
Overall, understanding these factors and taking steps to improve them can help applicants secure a lower interest rate on their LAP.