Factors that Affecting Your Interest Rate on a Mortgage Loan

1
A loan against property is a credit instrument
that can be used for several requirements. For
example, individuals can use the loan amount to
purchase a new home or establish a new business.
Nevertheless, borrowers should understand the
factors affecting interest rates on mortgage
loans.
7 Key Factors Affecting the Interest Rate on a
Mortgage Loan
2
Top seven factors that determine loan against
property interest rates
Here is the list of factors on which the interest
rate on mortgage loan depend upon
Age of the borrower- Age is one of the most
crucial factors determining LAP interest rates.
Young individuals are offered a lower interest
rate on a mortgage loan than older applicants.
This is because lending institutions believe that
if a borrower has recently started working,
he/she has time to establish a credit history
with more earning potential in the future.
Nevertheless, an individual between 30 to 35
years of age will have a stable career and a
decent financial account. Therefore, lenders
sanction such applications at a low-interest rate.
External factors- External factors, such as the
RBIs monetary policy, economic growth rate, and
inflation rate affect the mortgage loan interest
rates. All of these external factors are
interlinked and affect the LAP interest rates in
one way or another.
Type of property- The type of property that
individual wishes to mortgage also affects the
interest rates of a LAP. There are two types of
properties, i.e., residential and commercial. If
an applicant has valid ownership of the
commercial property, he/she can expect a low
interest rate on mortgage loan.
3
Location of the mortgaged property- A property
in a posh location, with all the basic amenities
and good connectivity, tends to attract a low
mortgage loan interest rate. This is because
lenders can easily dispose of such properties and
recover the unpaid dues in case of any credit
defaults. Loan repayment tenor- A loan against
property is one such credit facility that comes
with a longer repayment tenor. However, a longer
repayment tenor means higher interest rates.
Willing borrowers should know the ways to
determine the ideal repayment tenor for a loan
against property and ensure that they get the
lowest interest rate for the loan amount. Loan
amount-
The loan amount that an applicant borrows impacts
the loan interest rate significantly. In case an
applicant seeks a larger loan amount or the
lender sanctions a larger LTV ratio for LAP,
they have to pay a higher interest rate. This is
because lenders consider a higher principal
amount to be of high risk and vice versa.
4
Location of the mortgaged property A property
in a posh location, with all the basic amenities
and good connectivity, tends to attract a low
mortgage loan interest rate. This is because
lenders can easily dispose of such properties and
recover the unpaid dues in case of any credit
defaults. Loan repayment tenor A loan against
property is one such credit facility that comes
with a longer repayment tenor. However, a longer
repayment tenor means higher interest rates.
Willing borrowers should know the ways to
determine the ideal repayment tenor for a loan
against property and ensure that they get the
lowest interest rate for the loan amount. Loan
amount
The loan amount that an applicant borrows impacts
the loan interest rate significantly. In case an
applicant seeks a larger loan amount or the
lender sanctions a larger LTV ratio for LAP,
they have to pay a higher interest rate. This is
because lenders consider a higher principal
amount to be of high risk and vice versa.
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Type of interest Another key factor that affects
the interest rates on a loan against property is
the type of interest. Lending institutions in
India offer LAP at fixed and floating interest
rates. A fixed interest rate remains unchanged
throughout the repayment tenor, irrespective of
fluctuations in the market. On the other hand, in
the case of floating interest rates, market
fluctuations affect the interest rates.
Therefore, one should choose the type of
interest wisely as per their financial
capabilities. Moreover, willing borrowers should
know the eligibility criteria and the
documentation required for a loan against
property. Meeting these parameters will allow
them to get the loan sanctioned within the
shortest turnaround time and ensure a smooth
borrowing experience. To sum up, by focusing on
the factors mentioned above, customers can
improve their chances of ensuring the lowest
loan against property interest rate. Hence, one
should apply for this credit facility keeping
these factors in mind, and enjoy a hassle- free
borrowing experience. Several financial
institutions in our country, such as Bajaj
Finserv, extend pre-approved offers on their
financial products, such as loans against
property, home loans, etc. These exclusive offers
streamline the application process and fasten
the disbursal of loans significantly. To check
the pre-approved offer, one needs to enter
his/her name and contact details in the required
section of the lenders website.