Life can throw unexpected challenges your way, and in such times, financial liquidity can act as an anchor, helping you navigate through tough situations.
One of the best ways to arrange funds when met with a financial emergency is through a loan against property. A loan against property or a mortgage loan can help loan borrowers secure substantial funds by pledging a residential or commercial property they own as security. Typically, lenders sanction up to 60% of the property’s value as a loan. The loan amount can go higher for high-value collaterals. Mortgage loans are a secure way to arrange funds.
However, proper financial planning is crucial and so is borrowing at a low loan against property interest rates. The interest rate you get on your mortgage loan will have a direct impact on your loan EMIs as well as the total cost of borrowing funds. So, here are a few simple tips to help you close a low loan against property deal.
Simple Tips to Help You Find the Lowest Interest Rates on Loans Against Property
1. Maintaining a High Credit Rating is a Must: If you want to secure a low loan against property interest rate, one of the most important things to keep in mind is that your credit rating is important. The CIBIL score is the credit rating assigned by TransUnion CIBIL, the oldest credit information bureau in the country. The CIBIL score is important as it gives lenders clarity regarding whether or not you can repay your loan EMIs on time. A low CIBIL score indicates a high risk of loan default and the lender suffering losses. To secure a loan against property at a low interest rate, make sure to apply when your credit score is at least 750. The higher your credit score, the better your ability to negotiate for a low property loan interest rate.
2. Opting for a Low LTV Ratio is Important too: The LTV ratio is the ratio of the loan amount obtained to the value of the property. A high LTV ratio implies a high loan amount and therefore, higher chances of a loan default. Consequently, when borrowers opt for a low LTV ratio loan, the chances of a loan default decrease considerably, leading to lenders showing greater willingness to sanction the loan at a lower loan against property interest rate. In any case, mortgage loans always carry an inherent level of risk and consequently, loan borrowers must always ask for what they need and can comfortably pay and not what they are eligible for.
3. Pledge a High-Quality Collateral: For mortgage loans, the risk for the lender is offset by the collateral. Therefore, the quality of the collateral plays a crucial role in helping borrowers secure a low loan against property interest rate. A high-value collateral, such as a property located in a premium society or the centre of the city, will always help fetch a lower mortgage loan interest rate than an old property or a property located on the outskirts.
4. Apply With a Low Debt-to-Income Ratio: To assess your repayment capacity, lenders also look into your debt-to-income ratio. The debt-to-income ratio is the proportion of an individual’s total income that goes toward repaying debt. A high debt-to-income ratio implies that the loan applicant already has too much debt and consequently, doing business with them can prove risky. Thus, when people with a high debt-to-income ratio apply for a loan, lenders either reject their loan application or charge an exorbitantly high property loan interest rate on the loan. Ideally, individuals planning to apply for a mortgage loan must keep their debt-to-income ratio below 40%.
5. Maintain Stable Income and Employment: Individuals with a stable income and job rarely default on loan repayment. Consequently, these people are sanctioned loans at low interest rates. If you are planning to apply for a mortgage loan any time soon, do not switch jobs frequently.
Conclusion
In conclusion, securing a low loan against property interest rate is crucial. One can easily secure a low interest rate on their property loan if one pledges a high-quality collateral, keeps a low debt-to-income ratio, and maintains stable income and employment. Maintaining a high CIBIL score and meeting all the property loan qualifying criteria proves helpful too.
