Are Housing Loan Interest Rates Negotiable?


Housing loan interest rate tends to get influenced by several factors, including credit score, loan tenure, interest type, down payment, and processing charges. For instance, an applicant with a credit score of more than 750 and a stable source of earning is more likely to get better repayment terms and low rates of interest on housing loan from a lender.

It also indicates that housing loan interest are negotiable to some extent and applicants with better creditworthiness and sound financial profile are better positioned to secure favourable terms. Regardless, to achieve it, applicants must work on their loan repayment capability and brush their negotiation skills as well.

5 Tips to negotiate a better rate of interest 

Before applicants proceed to negotiate with a financier, they must do their share of research. Here are some tips that one must follow to stand a chance for better negotiation when it comes to securing attractive interest rates on home loans in India.

Step 1 – Find out the prevailing market rates

When an individual is aware of the prevailing interest rates and associated charges, he/she is better positioned to negotiate for favourable terms of service. Also, individuals should find out the rate of interest financial institutions levy on new and existing customers. 

Existing customers with a reliable repayment history and a good relationship with the lender stand a better chance to negotiate for a low housing loan interest rate. Individuals with a strong credit history can also secure a better deal based on the prevailing rates.

Step 2 – Become a creditworthy borrower

Financial institutions mostly hesitate in extending a loan to new applicants who carry poor credit history and restricted repayment capability. Consequently, they levy a high rate of interest on the loan amount borrowed by such individuals.


Nonetheless, to secure a home loan at the best rates from financial institutions quickly, new borrowers must take measures to improve their creditworthiness that would, in turn, help enhance their credit history as well over time. The best way to do so is by making timely repayments and maintaining a low credit utilisation ratio, preferably between 30 and 50%. Also, applicants must make it a point to keep a steady source of employment and earnings.

Step 3 – Ask for better terms and associated charges

Besides negotiating a lower housing loan interest rate, applicants must also discuss better terms of services concerning the loan features and associated charges. For instance, they can negotiate better terms for the top-up facility and repayment schedule.

Usually, leading financial institutions extend pre-approved offers to customers to help make the process of securing a loan smooth and less cumbersome. Mostly, such lucrative offers accompany multiple financial products, like home loans and loans against property. You can check your pre-approved offer by entering your name and contact number.

It will help you to find out your pre-approved offer easily and will help you negotiate accordingly.

Step 4 – Choose favourable loan terms

As a loan applicant, one should pick loan terms that help his/her cause when it comes to securing a low rate of interest. For instance, individuals may consider to trim home loan tenure and make a higher down payment to avail better terms on the loan. 

Selecting shorter loan tenure will also reduce their overall interest burden and facilitate increased savings. To find out which loan tenure works the best for them, intending borrowers may use a home loan EMI calculator available online and make an informed decision accordingly.

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It will also help compute the EMI amount in advance and will facilitate better financial management. This, in turn, is one of the top benefits of calculating the EMI before taking a home loan. While at it, they may also consider paying off debt early to save more on interest. However, such a decision should be based on the charges that accompany the facility. 

Step 5 – Opt for a refinancing facility

In case existing customers fail to negotiate with their financier successfully, they can consider switching to a new lender altogether. Typically, financial institutions are not keen on losing their current customers, and most of the times try to retain customers by offering suitable terms of services. 

Nonetheless, borrowers always have the option to settle for the available benefits or switch to a new lending institution that extends better terms of service at attractive rates.

It is recommended that before switching to another financial institution, individuals become familiar with their terms of services. For instance, they should find out more about their clauses regarding balance transfer and top-up facility, prepayment of loan, and loan charges, and then negotiate about the housing loan interest with the new lender accordingly. Nevertheless, when repaying the loan amount, borrowers can also avail the home loan interest tax benefits and increase their savings while making the most of such interest payment.

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