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Consider These Points to Get the Best Deal on Your Home Loan

Ayushi Choudhary

With property prices soaring and the market’s high-interest rate regime, purchasing a home is a once in a lifetime decision for many of us. As a result, it’s critical to be aware of all of its components and to obtain a loan that is completely aligned with one’s financial goals.

Making a minor blunder during the home loan process or mishandling can be extremely costly. If you’re thinking about buying a house, you should exercise extreme caution while applying for a home loan. Borrowers of home loans are being enticed by the current low interest rates. At least 15 banks and four housing financing organisations are already offering home loans with interest rates as low as 75% per year. Here are a few things you must consider to get the best deal on your home loan.

1. Factors Affecting the Eligibility Criteria: Calculating your EMI is a simple approach to determine your loan eligibility. You can use an online home loan EMI calculator to your advantage. In most cases, banks cap the monthly payments at 40-50 per cent of the borrower’s wage, i.e. basic plus dearness allowance. Allowances and reimbursements are not considered. Also, if you have any outstanding liabilities, such as a loan, your eligibility is reduced even more. Some banks are picky about how many dependents you have.

2. Learn about floating or fixed rates: Floating and fixed interest rates are the two types of interest rates offered by banks. A floating interest rate is determined by the market. It follows the same pattern as the base rate. Fixed interest, on the other hand, is locked in for a set number of months as specified in the loan agreement. It’s vital to remember that, in most circumstances, floating rates are less expensive in the long term than fixed rates. Though a fixed interest rate may appear more appealing in a high-interest environment, experts advise against it for a variety of reasons. First, the fixed nature of the interest is a disadvantage in a long-term loan such as a home loan, when rates are sure to fall at some point, even if they are now high. In that instance, even if interest rates fall, the borrower must always return the same amount.

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3. Availability of margin money: Lenders often finance up to 90% of a property’s worth, leaving the remainder to be paid out of pocket, which is referred to as the “down payment.” In addition, there are several other expenses, such as registration and stamp duty fees, interior décor, and so on, that must be met without financial assistance. The margin money requirement is the sum of these factors, which might vary depending on the borrower’s credit score, age, property cost, loan amount, and loan tenor. Thus, don’t just look at the low-interest rates. Before you apply for a home loan, be sure you have enough margin money on hand to avoid jeopardising your other important financial obligations.

4. Check availability of a co-applicant to enhance borrowing ambit: Although a low interest rate may appear appealing, are you eligible for a loan at that rate? If the loan amount is likely to be more than your borrowing capacity, a co-applicant should be considered. Having a co-applicant can help you borrow more money. If your credit score isn’t quite up to par, a co-applicant can help you secure the loan and lower home loan interest rate.

5. Keep a good credit score to get the best possible rates: If your credit score is below average, banks will normally charge you a higher interest rate on a house loan (i.e. below 750). They charge a higher risk premium to applicants who meet their criteria but have a low credit score. So, when you apply for a home loan, be sure your credit score is good and that you’re acting to keep it that way.

6. Make sure you have all the documents for a home loan: When you apply for a house loan, you will be needed to provide several documents. These documents include your KYC, income/credit paperwork, and property documents. Your initial property is mortgaged as a security interest in the property being financed by your lender.

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7. Know what home loan balance transfer is: Taking out a bank loan does not imply that you will be obligated to repay it in the future. You can always swap lenders in exceptional circumstances or if another lender offers a much better rate. On floating rate loans, most banks no longer charge a prepayment penalty. Thus, the processing fee is the only additional expense you will incur.

8. What is your insurance cover: When taking out a house loan, you must acquire insurance to protect yourself from being held accountable for the loan’s outstanding balance. If something unexpected and unpleasant happens to you, the insurance provider will reimburse the outstanding loan.


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