Almost everyone dreams of having their own home. However, saving and building enough funds to buy a house takes years. Home loans can help you finance your house purchase, and you can repay the loan in equated monthly installments.
Tips to Choose the Best Home Loan in India:
Several home loan schemes are available, and picking the right one can get time-consuming and tedious. Everyone wants to take a home loan in India because it is one of the best ways to buy a house. While it seems like an easy thing to do, you need to be very careful when choosing the right home loan lender and taking up the offer. So, here are some tips to help you select the best home loan in India.
Look for Lower Interest Rates:
One of the most important aspects of selecting home loans is the interest rate. Home loans are a long-term financial commitment, and you don’t want to regret getting a loan with a higher than the average interest rate. You can get a home loan for the interest of around 8%, based on the repo rate and current market conditions.
However, when comparing loan schemes, give preference to the schemes with the lowest home loan interest. A great way to reduce your interest rate is by maintaining a credit score of 750 to 800. Some lenders offer less interest to individuals who have a good credit history.
Interest Rate Conversion:
You can get home loans on fixed or floating interest rates. Fixed rates are generally 2-3% higher than floating rates because the rate remains the same throughout the loan tenure.
Based on recent trends, the interest rates have reduced more than they have increased, which is likely to continue in the coming years.
Hence, consider opting for a floating rate where the rate changes as per the current market trends. If you’ve already applied for a loan with a fixed interest, you have the option to convert to floating by paying a minimal fee.
Compare Processing Fee:
All home loans carry a processing fee of 1% of the loan amount. This fee is used to verify your documentation, get the property value, evaluate your credit report, and other associated costs of your home loan.
Unlike personal loans, where the processing fee is deducted from your loan amount, a home loan processing fee needs to be paid separately.
When searching for loan schemes, try to find one with a lower processing fee. This way, you can utilize more of your corpus funds on the down payment. Sometimes, processing fees might not cover legal costs, so read the inclusions of the processing fee carefully.
Choose Lender Wisely:
Banks are not the only place to avail of a home loan. Housing companies and NBFCs offer home loans too and sometimes have better schemes than traditional bank loan schemes.
Public sector banks have lesser interest rates, but they have a lengthy processing time and very rigid stipulations associated with the loan that you might not always be eligible for.
So when you’re searching for home loan lenders, including NBFCs, housing companies, and other financial lenders in your search.
Higher Down Payment:
You don’t always get a loan for the value of your property. Home loans are disbursed at 85% of your property value, and the borrower pays the rest out of pocket. So, before applying for a home loan, make sure you have enough funds to cover the excess amount.
If you can pay a higher than the required down payment, it even helps your loan amount, thus reducing your overall financial burden.
Optimal Tenure:
Some of the best home loans in India can be taken for as long as 30 years. But just because you can get a 30-year repayment period doesn’t mean it’s always the best option for you. Use a loan calculator to evaluate loan tenure with the loan amount you need and interest rates.
Then choose the loan option that you can repay comfortably. Long tenure loans usually have a higher interest rate, so you will pay more interest even if your EMI is less. An ideal tenure for home loans is 12 to 15 years since these tenure loans have the best interest rates.
Conclusion:
Ultimately, every individual will have a different experience with the loans featured above. The best way to select the right loan for you and your family is to gather as much information about all of the available options. Then it’s up to you to compare loan terms, rates of interest, terms of payment, and any other relevant factors that may contribute to making your final choice.
Among all the essential considerations when getting a house loan, your topmost concern should be getting a loan with lower home loan interest. Most of your EMI repayment will go towards interest payments, and once the interest is cleared, you’ll pay off the principal amount.
So make sure to pick a low-interest scheme to reduce your financial burden.
Also, read about business loan in Mumbai
