One of the best ways to unlock the equity locked in one’s home is to avail of a mortgage loan. Mortgage loans require borrowers to pledge a property they own as collateral. This property could be both residential or commercial. In fact, many lenders also sanction loans against land. Once you pledge a property as security, you won’t be able to sell it until you clear off the pending loan. However, you will be allowed continued usage of the property and can even drive income from it, i.e. through rentals. Mortgage loans are long-tenor and low-interest-rate loans that come with flexible end-use. Borrowers can use these loans to meet both personal as well as professional requirements. 

Mortgage loan interest rates tend to be on the lower side, primarily because these loans are backed by security and therefore, the risk for lenders is low. A variety of factors affect the mortgage loan interest rates, such as external economic factors, current government policies, external market conditions, and the credit profile of the loan applicant. 

Mortgage loan interest rates start as low as 8.15% per annum. However, if you wish to be considered for such low interest rates, you must understand the various factors that affect the interest rate on loans against property and use your understanding to secure the best mortgage loan interest rates. 

Mortgage Loan Interest Rates: Factors That Affect 

1. Your CIBIL score is one of the most important factors that will affect the rate of interest you get on your loan. The CIBIL score indicates a loan borrower’s repayment capacity and their intent to repay their loan EMIs on time. It also indicates how excessively dependent they are on credit and how responsible they feel towards its repayment. To be eligible for the lowest interest rate on your loan against property, apply with a CIBIL score in the range of 750 to 900. 
2. The LTV ratio you opt for will also help your lender decide the rate of interest to be offered to you. High LTV ratio loans carry higher risk for lenders and therefore, are charged at a higher rate of interest. On the other hand, in the case of low LTV ratio loans, the chances of loan default are low and thus, these loans are sanctioned at lower mortgage loan interest rates. 
3. Whether or not you meet all the loan against property eligibility criteria is important too. Use loan against the property eligibility calculator to calculate the loan amount you are eligible for. Applying for an amount you qualify for, based on your income and other statistics, will help you negotiate for a low mortgage loan interest rate. 
4. The quality of the collateral is extremely important in the case of loans against property. High-quality collaterals with high resale value grant loan borrowers high negotiating power and the ability to ask for low mortgage loan interest rates. 
5. Lenders will also take into account the loan tenor you have chosen while deciding the rate of interest to be extended to you. In most cases, lenders charge a low rate of interest for short-tenor loans and a high rate of interest on long-tenor loans. 
6. External market conditions also affect mortgage loan interest rates. When the inflation within the Indian economy reaches beyond acceptable levels, the Reserve Bank of India responds by increasing the Repo Rate. An increased Repo Rate makes all loans, including loans against property, expensive. On the other hand, a reduced Repo Rate causes loans to be cheaper. 

Final Words

Mortgage loans are a safe measure if you are looking to borrow substantial funds at a low rate of interest. However, since mortgage loans involve a long repayment tenor, often stretching up to 15 to 20 years, securing low interest rates is vital. What is equally important is planning one’s repayment strategy and borrowing keeping one’s repayment capacity and income in mind. The tips mentioned in this article will help you secure a loan against property at low interest rates and the property loan EMI calculator will make sure that you can repay this loan comfortably and without defaulting. Another important advice here would be that if you have availed yourself of a mortgage loan, you must set aside an emergency fund. This emergency fund will allow you to cover your loan EMIs comfortably and without defaunting in case of a financial emergency.