How to Get a Low Interest Rate on Your Home Loan: 7 Practical Tips

Summary

Everyone dreams of owning a home — but high EMIs can make the journey difficult. One of the smartest ways to keep your home loan affordable is to secure a lower interest rate. Even a small reduction in interest can save you lakhs over the loan tenure. In this blog, we’ll share 7 practical tips on how to get a low interest rate on a house, so you can turn your dream into reality without straining your monthly budget.

Key Takeaways

• A lower interest rate reduces both EMI and total interest paid
• Credit score, income, and lender choice influence your rate
• Choosing the right loan type and tenure helps save money
• Negotiating and staying updated on rates can benefit you
• Small efforts today can lead to big savings tomorrow

Table of Contents

1. Why a Low Interest Rate Matters
2. Tip 1: Maintain a Good Credit Score
3. Tip 2: Choose the Right Lender
4. Tip 3: Opt for a Shorter Tenure (If Possible)
5. Tip 4: Compare Fixed vs Floating Rates
6. Tip 5: Improve Loan Eligibility Before Applying
7. Tip 6: Use Balance Transfer or Conversion Options
8. Tip 7: Make a Higher Down Payment
9. Final Thoughts
10. FAQs

1. Why a Low Interest Rate Matters

Home loans usually last for 15 to 25 years. A lower interest rate, even by 0.5%, can make a big difference in your:

• Monthly EMI
• Total interest paid over the loan duration
• Loan affordability and approval chances

For example, on a ₹30 lakh loan for 20 years:

• At 9% interest, your EMI is ₹26,992
• At 8.5% interest, your EMI is ₹26,035
• That’s a saving of ₹957/month or ₹2.3 lakh over the loan

2. Tip 1: Maintain a Good Credit Score

Your credit score (CIBIL score) is one of the first things lenders check.

• Score above 750 is considered excellent
• Lower scores may lead to higher interest or rejection

To improve your score:

• Pay EMIs and credit card bills on time
• Avoid taking too many loans at once
• Check your credit report for errors and fix them

3. Tip 2: Choose the Right Lender

Different lenders offer different rates, even for the same profile. Before applying:

• Compare interest rates on multiple websites
• Check hidden charges like processing fees or insurance
• Look at reviews and customer service ratings

Sometimes, NBFCs or housing finance companies offer better rates than big banks, especially for salaried individuals.

4. Tip 3: Opt for a Shorter Tenure (If Possible)

While longer tenures reduce your EMI, they also increase your total interest.

If you can afford slightly higher EMIs, choosing a shorter tenure helps you:

• Get lower interest rates
• Close your loan faster
• Save on interest payments

Use a home loan EMI calculator to see what works best for your budget.

5. Tip 4: Compare Fixed vs Floating Rates

You can choose between:

• Fixed Rate: EMI remains the same throughout
• Floating Rate: EMI may change depending on market rates

If rates are expected to drop, a floating rate loan could be cheaper. But if you prefer stability, go for a fixed rate.

Tip: Some lenders offer a hybrid option — fixed for the first few years, then floating.

6. Tip 5: Improve Loan Eligibility Before Applying

Higher income and job stability often lead to lower rates. To improve your profile:

• Include a co-applicant (like your spouse)
• Show additional income sources (rent, freelance work)
• Clear existing personal loans or credit card dues

A stronger profile gives you better bargaining power with lenders.

7. Tip 6: Use Balance Transfer or Conversion Options

Already have a home loan? You can still reduce your interest rate by:

• Balance Transfer: Shift your loan to another lender offering a better rate.
• Conversion Fee: Pay a small fee to your current lender to reduce your rate.

Compare the savings vs the costs before switching.

Example: If your rate drops from 9.5% to 8.5%, you could save ₹4–5 lakh over 20 years, even after paying the conversion fee.

8. Tip 7: Make a Higher Down Payment

If possible, try to pay more upfront. A higher down payment means:

• Lower loan amount
• Lower EMI
• Better chances of getting a competitive interest rate

Most lenders require a minimum of 10–20% of the property value as down payment. Paying 30–40% can strengthen your application.

9. Final Thoughts

Getting a home loan with a low interest rate isn’t just about luck — it’s about being prepared. From maintaining your credit score to choosing the right lender, each decision matters. These 7 tips show how to get a low interest rate on a house without shortcuts. It’s not just about saving money — it’s about making your dream home affordable and stress-free. So, do your research, stay informed, and take control of your loan journey.

10. FAQs

Q1. What is a good interest rate for a home loan in India right now?
Interest rates vary, but anything between 8% and 9% is considered competitive.

Q2. Can I negotiate the interest rate with the bank?
Yes, if you have a good credit score and a stable job, you can request a better rate.

Q3. Is floating interest rate risky?
It can change with market conditions. If rates go up, your EMI increases. But it could save money if rates fall.

Q4. How does a credit score affect my loan rate?
Higher credit scores show lower risk for the lender, leading to lower interest offers.

Q5. Should I switch my home loan to a new bank for lower rates?
Yes, but only after comparing costs like processing fees, legal charges, and savings in EMI.

Q6. Can I reduce my loan rate after taking the loan?
Yes. You can request a rate conversion or go for a balance transfer.

Q7. Does a shorter tenure always mean lower interest?
Not always, but lenders often offer better rates for 10–15 year loans than for 20–25 year ones.