Finding the Lowest Interest Rate for Loan Against Property

Loans against property or mortgage loans are loans that people avail of by pledging a property they own as security. Once a borrower pledges a property as security, they essentially give their lender the right to sell the pledged collateral if they are unable to repay their loan.

This agreement gives lenders a lot of confidence that even in the worst-case scenario that the borrower does not pay the loan, they won’t suffer losses. This confidence allows lenders to sanction mortgage loans at low interest rates.

Mortgage loan interest rates in India start from 8.30% per annum but can go much higher, especially if the credit profile of the loan applicant isn’t ideal. In this article, we discuss some simple tips that will help you secure the loan against the property lowest interest rates. 

Simple Tips on How to Get a Loan Against Property Lowest Interest Rates

1. Maintain a High CIBIL Score: The CIBIL score is a three-digit number between 300 and 900 that reflects an individual’s ability to repay loans on time as well as their attitude towards credit and its repayment in the past. A high CIBIL score indicates a responsible attitude towards credit and its repayment.

   It also shows that the loan borrower is not excessively dependent on credit and has their debt situation entirely under control, which essentially means that if they do avail themselves of another loan, they will be able to pay it easily and without defaulting. Therefore, when people with high CIBIL scores, preferably in the range of 750 to 900 apply for a loan, not only do they get approved quickly but they are also able to demand the best loan terms and conditions.

2. Securing the loan against property lowest interest rate also becomes easy when you pledge high-quality collateral. Mortgage loans are backed by security or collateral. The quality of the collateral determines the risk for the lender. For instance, pledging a high-value, high-quality collateral, such as a commercial property located in an upscale mall or a home located in one of the poshest communities of the city, will reduce the risk for the lender and encourage them to extend you a loan on the best possible loan terms and conditions, including low interest rates.

3. Borrowers must opt for a low loan-to-value ratio loan if they want to be considered for a low-interest rate loan. The loan-to-value ratio refers to the percentage of the pledged collateral’s fair market value that is being asked as a loan. When an individual asks for a high loan amount compared to the value of the property, the risk for the lender goes up and thus, high LTV ratio loans generally lead to lenders extending the loan at high interest rates. If you want to be considered for a low-interest loan, keep the LTV ratio low.

4. 4.If you are planning to avail yourself of a mortgage loan, make sure to keep your fixed-income-to-obligation ratio below 40%. The fixed-income-to-obligation ratio, also known as FOIR or debt-to-income ratio, is the ratio of one’s total income going towards the repayment of debt. A high FOIR indicates that a significant portion of one’s income is already going towards the repayment of debt, and therefore, if the loan borrower borrows more money or takes another loan, repayment can become difficult. Consequently, when the FOIR is high, lenders view the mortgage loan process as a risky deal and charge a higher rate of interest on it. On the other hand, individuals with low debt-to-income ratios can demand better loan conditions, including lower mortgage loan interest rates.

5. Borrowers can also benefit from using a mortgage loan eligibility calculator and mortgage loan calculator. When a loan borrower applies for a loan amount that they are eligible for and can qualify for based on their income, age, existing debt obligations, etc., they have a better chance of getting approved as well as securing the loan on loan against property lowest interest rates, primarily because when one applies for a loan amount they qualify for, chances of a loan default decrease significantly. 

Final Words 

If you are planning to avail yourself of a mortgage loan in India, use the tips discussed in this article to secure yourself the lowest interest rate mortgage loan and pay it off easily and without defaulting.