Applying for a home loan is not as easy as it may seem. It requires careful planning, plenty of research and consultation. You must consider several factors before taking a loan. This includes choosing the right lender, comparing the different offers from different lenders, before zeroing down on the best offer to suit your needs.
If you are a first-time home loan borrower, the whole process may seem overwhelming initially. So, to help you deal with the various processes and choose the right housing loan in India, we list down a few helpful tips.
- Decide the amount you want to borrow
The amount you want to borrow will greatly depend on the value of the property you want to purchase for your family. Generally, the lenders provide a maximum of 80% of the property value as loan. In some cases, if you have an existing relationship with the lender, you can get up to 90% of the property’s value as a loan.
However, it is imperative that you assess your finances and down payment capacity before deciding on the maximum loan you can afford to borrow. It is better to use the EMI calculator to know the exact EMI payable for the amount you want to borrow. This will help you choose the right amount so that the EMI is affordable, and you can easily pay the same without compromising on your usual expenses.
- Choose the right loan type
In India, the lenders offer different types of home loans to suit the varying needs of the borrowers. So, based on your specific needs, apply for the right type of home loan. For example, if you want to purchase land on which you want to build the house, you can apply for a plot loan.
If you work in an unorganised sector, and want to upgrade your existing home, you can apply for a Reach home loan.
- Consider the interest rate and type
When you compare the loan offers from different lenders, you may invariably look at the rate of interest levied by the lender and choose the one that has a lower interest rate. However, you must also pay close attention to the type of interest charge, i.e., if the interest is floating or fixed.
In floating interest rate loans, the rate of interest changes based on the existing market condition. Whereas, in fixed interest rate loans, the rate of interest remains fixed throughout the loan tenure.
Most home loan experts recommend choosing a floating interest rate as it tends to be a few points lower than the fixed rate. Also, it allows you to take advantage of the favourable market condition and the overall interest payment in the long run is lower than fixed rate.
- Ask about the processing fees and other charges
When you apply for a home loan, you are obliged to pay several fees, some of which are statutory, and a few other charges are levied by the lender. One such significant charge associated with home loan is the processing fee. Generally, lenders charge about 0.5% of the loan amount you borrow as processing fees.
So, when you look for the best loan deal, look for a lender that has the lowest processing fee and other charges. Also, ensure that there are no hidden charges involved. It is better to apply for a loan with a reputed financial organisation that has a very transparent policy.
Final Word
Now that you are aware of the various factors you must consider while applying for a home loan, do your due diligence and have a hassle-free borrowing experience.
