Everybody dreams of owning a house. Whether it is a small house or a large one, it is always the biggest investment an individual can make. You can always buy an apartment or a villa; the options are endless. However, the perks of owning an independent residential building are what makes people want to have their houses constructed from scratch. And there is always the freedom of designing the building the way you want. But constructing a house from scratch is not as easy as it sounds. It requires a lot of investment, and you will have to take a loan.
You will find different types of housing loan available at the lender. But you would like to avail one that works according to your financial status – a loan that you can avail at low interest rate. There is no set formula for availing housing loan at the lowest rate. But, there are some proven practices that can help you achieve what you are looking for.
With that said, in this post, we will discuss how you can get a house construction loan at a low interest rate.
1 Keep your credit score as close as possible to 900
The first thing that influences the interest rate of any loan is your credit score. Your credit score is valid and the most important indicator of your creditworthiness. As per the guidelines of RBI, lending institutions use it to fix house construction loan interest rate above and beyond the external benchmark rate. As a high credit rating reflects responsible credit behavior and a poor rating depicts an irresponsible one, if you have a low credit score, you will have to pay a higher interest rate on your home construction loan. On the other hand, you will enjoy lower rates if your credit score is high.
2 Increase your home down payment
Another factor that influences the interest rate is the loan amount you take. The higher the loan amount, the higher will be the interest rate. On the other hand, it will also depend on the tenure in which you will repay the loan. Although higher tenure makes way for lower monthly payment, it attracts higher interest. So, to get the loan at a low rate, you can reduce the loan amount, and therefore the loan tenure by contributing more towards the down payment. Use a home loan calculator to calculate the interest and all after you make a hefty down payment.
3 Apply for a loan jointly
The best way to reduce the pressure of a higher interest rate is to apply for the home construction loan jointly with your spouse and make them the co-applicant or the primary applicant of the loan. The majority of the lending institutions in India provide interest concession loans to women. Availing jointly will increase your eligibility as well, and you may also enjoy tax benefits.
These are the three prominent ways to get a home loan at a reduced interest rate.