Buying a home is an aspiration most people desire to achieve, which involves massive financial investment. With the easy accessibility of home loans, it has become feasible for individuals to realise their dream. Demand for housing loans is rising owing to the availability of substantial loan amounts at nominal interest rates, helping one materialise their dreams of owning a home.
A home loan is a significant financial decision. Hence, borrowers must be well-versed with the ins and outs of the credit option before proceeding to avail of it.
Top 8 tips to consider when opting for a home loan
Before availing a home loan, borrowers should consider the following tips, to make the borrowing worthwhile:
1. Compare different lenders
In order to make the borrowing worthwhile, borrowers must invest time in searching for the right lender. With the internet at fingertips, borrowers can easily compare different lenders and settle for one offering, extending competitive interest rates and better loan terms.
2. Know the rate of Interest
Interest rate significantly impacts home loan EMI and overall cost of borrowing. The affordability of the borrowing depends on the interest rate. Hence, borrowers should check and compare different interest rates to choose the nominal one before availing a housing loan. Moreover, borrowers should be careful when choosing between fixed and floating interest rates.
3. Check eligibility criteria
Borrowers must check the eligibility norms set by the lenders and adhere to them before starting with the application process of home loan.
- Applicants need to be Indian.
- Salaried individuals must belong from the age group of 23 to 62 years.
- Self-employed applicants must be from the age bracket of 25 to 70 years.
- For salaried individuals, there should be 3 years of minimum work experience.
- Self-employed individuals must have 5 years of experience in their current enterprise.
4. Keep documents hand
Along with adhering to the eligibility criteria, borrowers should also be mindful of keeping the following documents in order.
- KYC papers
- Income proof
- Residence proof
- Employee ID
- Salary slips for last 3 months
- Bank account statements
- Property papers
5. Choose affordable EMIs
Before proceeding with the home loan application process, borrowers must settle for an EMI amount they can afford to pay every month, keeping in mind the other financial liabilities. With a home loan EMI calculator, borrowers can easily evaluate the EMI amount. By trying several permutations and combinations of the three variables: loan amount, interest rate and loan tenor, borrowers can decide on a suitable EMI, helping them repay the loan amount on time.
Moreover, computing EMI amount beforehand helps borrowers prepay home loans or foreclose their loan accounts.
6. Select suitable repayment tenor
Selecting the right loan tenor determines how comfortably borrowers can repay the loan amount. If borrowers want to reduce the EMI burden, they must choose a longer loan tenor. They can opt for a shorter tenor if they want to minimise the cost of borrowing. In this regard, borrowers should know how to trim home loan tenor.
7. Maintain good credit score
A credit score reflects a borrower’s repayment history, hence is thoroughly scrutinised by lenders. Individuals willing to apply for a home loan must ensure a decent CIBIL score of 750 and above. It will help them fetch lower interest rates. In this context, borrowers must know how credit score determine home loan EMIs.
8. Check additional charges
Additional charges like administrative charge, home loan processing fee, prepayment charge, late payment penalty, EMI bounce charge etc. contributes significantly to the overall cost of borrowing. Hence borrowers should discuss these charges with the lender before applying for a home loan.
Keeping the aforementioned tips in mind will help borrowers receive quick approval for loan amounts and reap multiple benefits.
Moreover, borrowers will be able to reap the benefits of pre-approved offers extended by leading financial institutions on a wide range of financial products like home loans, loan against property etc. These offers expedite the loan application process and reduce the hassles of documentation. Intending borrowers can check their pre-approved offers by submitting their names and contact details.
To sum up, a housing loan is a long-term financial commitment, which, if not planned, will prove counterproductive. Hence, borrowers should consider the tips mentioned above before availing of a home loan.