How To Choose The Right Home Loan In India?
July 03, 2019
Getting the best deal on a Home Loan can be as tricky as choosing the home itself. With so many lenders offering many different types of loan products, selection can be challenging for homebuyers. This post lists five critical factors you must consider for choosing the best deal.
Just like the real estate options, there are countless options available for Home Loans. With every lender trying to attract borrowers through lucrative deals and offers, identifying the right lender can be challenging for homebuyers, especially for first-time buyers. However, there are a few crucial factors that can make it easier for borrowers to select a Home Loan.
1. Financing from Bank or NBFCs/HFCs:
In India both Banks and NBFCs/HFCs offers home loan. What sets apart Banks from NBFCs/HFCs is the rate of interest offered by banks is linked with external benchmark i.e Repo Rate which makes rates offered by Banks more transparent and rate benefits are transferred to the customers quickly. On the other hand, in case of HFCs/NBFCs rate of interest is linked to an internal benchmark i.e. PLR and hence rate benefits may not be transferred to the customers as quickly as the banks.
2. Interest Rate
While the rate of interest is essential for every type of loan, its importance is magnified when it comes to something as big as a Home Loan. With the amount of money involved, even the smallest of differences in the interest could mean a difference of lakhs of Rupees. So, start by comparing the Home Loan interest rate. Identify few lenders that are offering lower rate of interest before moving to the factors discussed below.
3. LTV Ratio
LTV or Loan To Value ratio is the maximum Home Loan amount against the value of the property. The remaining amount is to be paid by the borrower in the form of down payment. The LTV ratio varies from lender to lender. As per the Reserve Bank of India (RBI) guidelines, lenders can lend up to 90% of the cost of the property for loans of up to Rs 30 lakh. In case of properties above this threshold, lenders can lend up to 75%-80% of the property value. Depending on the price of the property and the down payment you can manage, you can get a step closer to selecting a lender.
4. Eligibility requirements
A lender would only grant loans to borrowers who can repay the same on time. For this, they have a set of eligibility requirements involving income, age, credit history and other factors. Loans are granted only to borrowers who meet these requirements. Many lenders are now offering Home Loan eligibility calculator on their official website. Home loan eligibility calculator helps customer in getting idea of how much loan amount he/she would be eligible to get. Use such online calculators to select lenders whose prerequisites can be met comfortably.
5. Loan EMI
The next important consideration is the loan Equated Monthly Instalment (EMI). Factors like the loan amount, loan tenure and interest rate are used for calculating your monthly instalment. Make sure that the EMI is something you can afford paying comfortably every month. Many banks now offer online Home Loan EMI calculator. Using the EMI calculator, you can easily calculate the EMI by entering few details.
6. Processing Fee
The lenders also charge a processing fee to process your Home Loan application. This fee varies from lender to lender. In most cases, the banks charge up to 2% of the applied loan amount. If you are looking for the best Home Loan, make sure that you do check the processing fee of the lender before applying as you are required to pay this fee from your own pocket.
Making an informed decision
While applying for Home Loans in India is now easier than ever, selecting the best lender is not. Use tools like Home Loan calculator as they make the comparisons easier, faster, and accurate.
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