A home loan is the most convenient way to purchase a property in India. Not only because of the sheer quantum of funds required but also because of the tax exemptions one can avail of. The decision becomes yet easier if you consider the current market, where home loan interest rates are at an all-time low. The current rate is the lowest it has been in the last 15 years.
In other words, uncertainty amid today’s volatile market conditions has led to a favourable scenario for those looking to purchase a home. While it is a lucrative time to avail of a home loan, there are a few things one must bear in mind before they go ahead and apply.
The first and foremost factor you must consider is the inevitable increase in interest rate. Over the tenor of your loan, the rate of interest is bound to increase. Therefore, it is essential you assess the feasibility of a loan amount and EMI basis this increase.
Read to know more about the other 5 top things to consider while availing of a home loan in 2021.
Ensure you avail of an affordable loan amount
The eligibility conditions applicable on a home loan in India not only vary across lenders, but also change as per the city of your residence or where you intend to buy a home. Keep in mind that a lender’s primarily guides the loan amount you can avail of, but it also factors in real estate prices in the location where you want to buy a property.
For instance, the cost of living in a metro is high; therefore, your fixed obligations are likely to be higher, leaving a smaller share for loan repayment. In simple terms, you’re likely to get a higher sanction in a non-metro than a metro.
Although your eligibility is decided basis your income and obligations, it’s essential to consider affordability from a long-term perspective. A specific EMI may be affordable today but may not be affordable a few years down the line if you hope to make big-ticket expenses then, such as funding your child’s higher education.
Try and forecast the increase in income and commitments you will have as you progress in life and choose a housing loan amount that you can repay without strain. Here, it is also important to save to make a hefty down payment. This helps you get better loan terms, since a higher down payment translates to a lower LTV (loan to value ratio) and facilitates easier repayment.
Check your eligibility before applying
Every city has a different income structure and standard of living, based on which the housing loan eligibility criteria are defined by the lender. However, some eligibility terms are universal, such as your CIBIL score. Having a high score of 750 or more will help you get a faster sanction on pocket-friendly terms.
Next, your salary or income comes into play. Ensure you meet the lender’s minimum requirements in this case. Though a housing loan is a secured loan, it involves a substantial amount, and lenders will review your repayment capacity before giving you a sanction. In most cases, lenders will work towards giving you a loan wherein the EMI does not take up more than 45–50% of your income. You can calculate this for yourself to be better prepared.
Check the current home loan interest rates
is one of the most important factors you need to check when availing of a housing loan. Compare different lenders for the lowest interest rates and enquire about the interest rate type to know whether you are accessing the loan at a floating or fixed home loan interest rate.
In the case of a fixed home loan interest rate, your EMIs across the tenor will remain the same until the reset date. In the case of a floating rate home loan interest rate, market fluctuations and the RBI’s rate changes will impact the rate applied to you. However, taking a home loan in India on a floating rate as an individual helps you make part-prepayments at no charge, which in turn, helps you become debt-free faster and save more on repayment. So, it’s imperative you consider the pros and cons of each before making your decision.
Choose the right housing loan tenor
When applying for a home loan in India, choosing a comfortable tenor for repayment is key. This will help you keep your EMIs affordable and allow you to attend to your other financial obligations with ease. Remember, a short repayment will decrease your housing loan interest burden; however, it increases your monthly outflow towards the loan.
On the other hand, a long tenor may increase your total cost of borrowing as you may end up paying more interest, but it keeps your EMIs low. That is why you should seek a balance when it comes to the tenor. An easy way to plan this is by using the , an online tool available on all lenders’ websites. Use it to compute your EMIs over different tenors and choose carefully.
Find out the fees and other related charges
Once you apply for a home loan in India, you will have to pay certain fees in order to access the sanction. Starting from a processing fee to secure fees, EMI bounce charges, penal interest, and prepayment and foreclosure charges, several fees are associated with a housing loan. While some charges are common across lenders, some may be unique. Be sure to check these with your lender before applying for a housing loan.
Keeping these factors in mind, consider the Bajaj Housing Finance Limited Home Loan to access high-value home financing at a competitive interest rate. You can apply with ease thanks to their simple eligibility criteria and repay comfortably over up to 30 years. Along with transparent fees and charges, this loan also offers value-added services. To get started with your journey to becoming a homeowner in 2021, apply today.