Keep 10 Points in Mind Before Taking a Decision on Home Loan

For big purchases like owning a home, most people are likely to rely on financial assistance as this is a major decision that can impact one’s finances for years. A home loan is one such financial support and an opportunity to meet your goals without straining your finances. A potential borrower should know that the Repo rate cut by RBI has brought the home loan interest rates low.

It is necessary to be aware of all aspects of a home loan before availing it as it is a long-term financial commitment and then choose a lending institution that aligns with your financial interests.

1. Interest Rate

Interest rates can be floating interest rates or fixed interest rates. Floating rates are subject to vary if there is any change in RBI’s base rate or economic conditions. In contrast, fixed rates are static for the entire loan tenor. Floating rates favor borrowers when the interest rates decline due to RBI policies or any other economic reason. You will find floating rates lower than fixed rates that help you reduce loan interest over the long term.

2. Down payment

Lenders provide a part of the home value that can be 75% — 90%, depending on your eligibility. You need to pay the sum as a down payment before getting the loan amount. If you are paying a significant amount as a down payment, you are reducing the repayment burden.

3. Maintain CIBIL Score

When you apply for a loan, a lending institution checks your repayment history and CIBIL score. They prefer a score of above 750 that shows credit card bills and loans have been paid off well by you. A higher CIBIL score will help you to get a loan at a lower interest rate quickly.

4. Foreclosure Norms

Look at the lender’s foreclosure norms for a loan. If allowed, you can repay the outstanding amount before the committed time and save on interest and expenses.

5. Get Pre-qualified

Lenders facilitate their existing clients with pre-qualified offers using their financial information like income, the cost to savings ratio, and your financial stability. As a pre-qualified client, you know the interest rate and loan amount available for you. It helps you apply for an affordable loan that is repayable in easy terms and a faster home loan process.

6. Research Well

The Internet is one of the easiest ways for extensive research. Utilize it before finalizing a home loan. The main components of your research should be down payment, EMIs, and tenor. It will help you choose a suitable home loan with a lender offering flexible loans as it is a long-term financial commitment between a borrower and lender.

7. Consider the factor affordability

You can find numerous options in home loans. You may find a pre-qualified home loan offer for a sizable amount. But it would be best if you considered your ability to afford the fixed monthly EMIs that can consistently and comfortably. Even one missed EMI can affect your credit score poorly.

8. Other charges than interest

There are other costs also that you bear as a borrower. Processing fees, missed or late EMI penalties and foreclosure costs are also included in the loan cost. Ask your lender for these costs.

9. Home loan balance transfer

You can choose a lender with a home loan balance transfer facility so that, if required, you can switch the lender.

10. Tenor

House loan repayment periods are longer than any other loan, say 20 years. You can choose a longer loan tenor, but more extended periods increase your loan cost. Therefore, avoid a long term if you can afford EMIs.

Additional Redd: Easily Apply for Home Loan Online by Understanding the Process & Eligibility

Thus, considering these points, you can get an easy home loan meeting all your requirements. For best interest rates, make sure you meet all the criteria laid down for home loan eligibility.