Major Factor To Consider While Choosing a Home Loan
Applying For a Home Loan? Tips You Need to Reduce the Loan Cost
A house can open up many possibilities. It is one of life's most cherished dreams. However, despite being a noble dream, not many people can fulfil their aspirations of owning a house, primarily due to the cost.
A home or housing loan is the best way to fulfil your housing dreams. Housing loan interest rates are among the lowest offered by Indian lenders. Scroll down to discover some time-tested tips to get the maximum benefits from a home loan.
The Top-5 Factors You Should Consider While Choosing a Home Loan
1. The Rate of Interest
Housing loan interest rates are generally of two types - fixed and floating. Analyse your repayment capability and choose the right type. If you choose the fixed rate of interest, your EMIs will never get affected by rate movement.
In contrast, if you choose the floating rate, your loan term may increase or decrease based on the change in rates. Housing loan interest rates are currently hovering around 8% per annum.
2. The Downpayment Amount
The downpayment amount is a crucial figure for a home loan. Usually, you have to make a 10% downpayment after loan approval. The lender will give you 90% of the property value as a loan.
However, if you apply for a high loan amount, the lender may increase the interest rates. Borrowers aspiring for the lowest housing loan interest rates make a higher downpayment. Since a higher downpayment reduces the loan amount, your EMI reduces, and so does the interest rates.
3. The Fees and Charges
Lenders usually charge a processing fee while applying for a home loan. Moreover, at any point, if you want to pre-close your loan, you may have to pay the penalty. Lenders like PNB Housing Finance do not charge any prepayment penalty for floating rate home loans.
Hence, before selecting a lender, you must check the costs and choose the lender charging the lowest fees.
4. The Eligibility
The eligibility for a home loan depends on several factors, with the borrower's credit score coming on top. You may conveniently expect the lowest housing loan interest rate if your credit score is above 750.
The lower the credit score, the higher will be the interest rate. Other factors that affect home loan eligibility are the borrower's age, monthly income, existing debt, spending habits, etc. The location of the property also plays a role in determining eligibility. You can get a higher loan amount if your house is in a proper area.
5. The Repayment Term
You need to choose the home loan repayment term carefully to avoid any financial stress. Indian lenders generally provide a repayment term of thirty (30) years.
However, when you choose a longer term, the interest rate might be on the higher side. Conversely, selecting a short repayment term increases the EMI, but you can benefit from a lower housing loan interest rate.
Since a home loan is a long-term commitment, it is wise to consider the factors mentioned above while applying for the loan.
When you plan correctly, a home loan can be the best mode of finance for constructing or purchasing a house. To sum up, try devoting some time to find out the lender, as the lender plays a significant role in determining your satisfaction with the loan.