Do Home Loan Interest Rates Affect Your Repayment Amount?

Home Loan is one of the most popular financial products among the customers. The reason behind this is the soaring prices of real estate. There are so many individuals that cannot pay the full home loan price in full installment. This factor hinders in the home purchase process. That’s where a Home Loan comes into the picture. Lenders provide the required loan amount at affordable home loan interest rates. There is an important question related to the Home Loan Interest rates that people often ask - How does the interest rate affect my repayment amount?

The reason behind this question is that when an individual takes a home loan, the lender provides a fixed tenure within which you need to repay the amount. Most people opt for the EMI method. Through this method, an individual needs to pay a fixed amount per month that will include a fixed portion of principal amount and interest amount. In this article, we will be telling you about how do Home Loan Interest Rates affect your Repayment amount and what are a few things that you need to look at before choosing the suitable interest rates for you. Keep Reading!

Affect of Home Loan Interest Rates on EMI amount

Home Loan interest rates usually tend to vary from one lender to another. There are a few factors that lenders check before deciding your final rate of interest. You always need to remember this thing: The Interest rate directly affects your repayment amount. The higher your home loan interest rates, the higher would be your repayment amount and vice versa. So, it’s important that you choose a lower interest rate that will help you make your EMI amount lower. 

Let’s understand this via an example. Suppose an individual wants to opt for a home loan of INR 30 lakh for a period of 15 years. To understand how home loan interest rates affect the repayment, we are taking two different interest rates - 7.50% and 10.30% per annum. 

On taking the interest rate of 7.50% per annum, the EMI amount would be INR 27,810 and the interest outgo will be INR 20,05,867. 

However when we consider the interest rate of 10.30% per annum, the EMI amount would be INR 32,791, and interest outgo will be INR 29,02,375.

So, you can clearly see that when you are choosing a higher interest rate of 10.30% per annum, you will be paying INR 5,000 more in the EMI amount as compared to the lower interest rate of 7.50% per annum. Similarly, there is a huge difference of around INR 9 lakh when it comes to the interest outgo.

That’s how Home Loan Interest Rates affect your repayment amount. You can do all these calculations by yourself with the Home Loan EMI Calculator easily. You will only need a few basic details such as Required Loan Amount, Rate of Interest and tenure. As soon as you feed all these details into the calculator, you will get the EMI amount instantly. 

Factors That Affect Your Home Loan Interest Rates

You also need to remember that Home Loan Interest rates depend on a few factors such as Applicant’s age, monthly income, property value, existing obligations, credit score, etc. For example, a good credit score (700 or above) can get you to ask for lower home loan interest rates as compared to an individual with a bad credit score.

Apart from the Credit score of an individual, lenders also decide the home loan interest rates according to the loan amount. Like the interest rates for loan amounts of INR 30 lakh and anything above INR 30 lakh will be different. There is a fixed slab of loan amount and rate of interest according to which your final rate will be decided. It tends to change from one lender to another.