For most people, the home is probably their most significant asset. Given the real estate prices, it is not easy to finance the cost of the property you wish to own without some extra help. This is where the whole idea of availing of a home loan steps in.
Unlike other types of loans, a home loan involves a large sum and longer tenure. Thus, it is understandable why you should weigh a home loan’s pros and cons before applying for one. After you have checked your credit score, eligibility for a home loan, the amount you need to set aside for repayment, use the ng SBI home loan EMI calculator, etc., it is time to select the financial institution you are going to avail yourself of a loan from. Here are a few points you should know in advance:
- Should you take a loan from a bank or a house finance company?
A public or private sector bank or a home finance company are your options for obtaining a home loan. Although HFCs are known for being lenient with regard to eligibility requirements, the interest rate they offer is based on the prime lending rate, which is often greater than the interest rates provided by banks. This implies that it might take longer for HFCs to pass on RBI’s rate cuts to the borrowers. This will cost the borrowers more. HFCs are typically more expensive than banks, even when it comes to processing costs for loans and other fees.
- What is the loan tenure they are offering?
In general, home loan providers offer loan repayment terms ranging from 1 to 30 years. The flexible home loan tenure, however, can be changed based on your income, age, and financial circumstances. Because your home loan EMIs are entirely dependent on the tenure you select, it is crucial to question your lender about the tenure range available.
Your EMI payments will be lower if you choose a long term, but it will be more expensive if you choose a shorter term. Use the ICICI home loan EMI calculator to assess your loan amount for the various tenures you choose. To use the EMI calculator on the portal, fill in the loan amount, tenure, and interest rate.
- What are the extra charges on your home loan that you need to pay?
Once your application for a home loan is approved, the lenders will want a processing fee before sanctioning the loan amount. The processing fee ranges from 0.5% to 2.50% of the loan amount and varies from bank to bank. Even though the processing fee is minimal, if you are unaware of it before applying for a house loan, it could end up costing you more money. As a result, be sure to ask your lender about the processing cost associated with your home loan. Also, consult with them if they charge prepayment charges in case you decide to foreclose your home loan account. If the prepayment charges are nil or minimal, it will allow you to prepay your remaining EMIs of your home loan in a single go on occasions when you receive a promotion, your business becomes profitable, or your financial situation improves for any other reason.
In short, while narrowing down your options, it is advisable to compare the processing fees, valuation fees, prepayment costs and other charges applicable by different lenders.
- What is the interest rate they charge-fixed or floating?
You will have to choose between fixed and floating interest rates for your loan, whether you acquire a home loan from a bank or an HFC. As the name implies, fixed-rate loans have an interest rate that doesn’t change throughout the loan. If you choose a floating rate, your monthly EMIs will continue to change because of interest rate fluctuations.
When rates are falling down, it is typically advised that borrowers take out home loans with flexible interest rates. Going with fixed interest is often seen as the best course of action if the loan length is between two and five years. For long-term loans, variable rates are generally seen as optimum. Keep in mind that the majority of banks permit you to convert your loan from floating to fixed by submitting an interest rate conversation request.
- What are the eligibility criteria for applying for the loan?
Before submitting an application for a home loan, one should carefully review the lender’s eligibility criteria of the lender.
Choosing a loan provider whose eligibility criteria you can meet would be a good option to ensure your application doesn’t get rejected. Your loan application is more likely to be rejected if the particular lender decides that you do not fall under their eligibility conditions. The method used to determine your eligibility for a home loan must be confirmed with your lender. While each lender has different requirements, they often centre on the borrower’s monthly income, credit score, age, and current debts. Almost all banks offer house loan amounts up to 60 times your current monthly net income. Additionally, banks do not factor in leave or medical benefits when calculating. You must understand in advance what exactly your lender is looking for while calculating home loan eligibility.
- Additional Resources
Since housing loans are generally taken for longer years, the borrower will have a long-term relationship with a home loan provider. Therefore, it is crucial to take into account any additional services provided by the loan provider you have selected. For instance, a few banks provide a step-up loan facility that increases the borrower’s loan eligibility, the flexibility of EMI payments, etc.
Conclusion
If compared with how things used to be, accessibility to home loans has improved significantly in the last few years. Online availability of EMI calculators such as the SBI home loan EMI calculator and the ability to check credit scores online are a few of the ways we Indian can check our eligibility way in advance. Many banks and non-banking financial companies (NBFCs) offer home loans at competitive interest rates, and using the ICICI home loan EMI calculator, and you can also check the affordability of those loans.
However, there are some factors and dynamics that need to be assessed before selecting the final lender. Aforementioned we have discussed some of the pointers that you should keep in your mind, which will help you make the right decision and fulfil your dream of being a homeowner at the earliest.
