How to select your home loan lender?!

By Nirjharini | April 17, 2014
Home loan provider

Home Loan Sanction

The business of mortgage lending has grown by leaps and bounds over the past few years and has become a hyper-competitive arena. With mortgage providers coming from diverse backgrounds, equipped with the required skills, training, experience and affiliation, it has become difficult for prospective borrowers to ascertain the best in the business. Irrespective of the qualification, training and goodwill, all mortgage people are sales professionals at the end of the day. Their priority goal is to convince people and get them on-board to apply for a home loan.

Charu, a Kolkata based engineer, in order to fulfill her long-cherished dream of owning a house, decided to apply for home loan. Tired of knocking the doors of several financiers, Charu chose one having convincing salespersons, without really conducting any prior research. As a result, she has to deal with several ordeals while repaying her debt, including dealing with scores of hidden charges, inflexible loan options and heavy penalties.

Though financial insight proves to be helpful, it is not required so often. Consumers search for the most reputable home loan providers and often end up getting trapped in the wordy circles of the best salesperson. It, thus, becomes important to do your homework and take every factor into consideration before opting for a particular lender.

Importance of Taking a Home Loan from a Reliable Lender

Stringent terms and conditions and absurd policies are a trademark of a financier that every potential borrower must avoid. It is only a reliable lender who would offer the needed flexibility when it comes to the terms and conditions of the loan. Apart from that, only a reliable bank would provide superior customer service and be willing to go down that extra mile for keeping its customers satisfied. Thus, it is wise to check the reputation of the lender if one doesn’t hold any relation with the bank.

Factors to Consider

Considering every possible, decision-affecting factor, planning out everything and following it systematically is the key to a smooth, hassle-free journey to owning your dream abode. There are numerous factors that help make a better decision when selecting a home loan provider.

  • Processing and Disbursal Speed – Dealing with a lender that rules out the possibility of any delays and is quick in processing the home loan application always proves beneficial in the long run. Normally, it takes 10-15 working days for banks to process an application, if everything is in order. Once approved, the lenders take additional 3-5 days for disbursing the amount of sanctioned loan.
  • Loan Qualification – The internal lending criteria varies from one bank to another and it is on the basis of these criteria that a particular amount of home loan is approved for the borrower. The criteria might cover the borrower’s age, job profile (preferably salaried, because of easily understandable salary slips and ITRs), employment stability, credit history and others. There are several calculators and eligibility charts, for instance the one offered by ICICI bank, which help the borrowers in apprehending their eligibility well in advance.
  • Repayment Terms – There are certain terms and conditions pertaining to the repayment of home loan imposed by banks on customers. Potential borrowers must clarify the terms related to settlement/foreclosing the outstanding amount, transferring the balance to another lender’s account, prepaying a part or full amount of home loan, and other things, before finalizing a lender.

How much should you pay?

The cost of taking a home loan would certainly vary from one bank to another. It depends upon the decision making abilities of the borrowers whether securing a home loan would prove to be an economical affair or a cost laden one. However, there are certain things that one must weigh carefully at the cost front.

  • Fixed Vs. Floating Rates – The rates vary from time to time; and as in the case of a well-planned investment portfolio, one must analyse the liability portfolio and plan on getting the maximum out of it. As a rule of thumb, if the loan period ranges between 2-5 years, going with fixed interest is considered an ideal move. Otherwise, floating rates are considered ideal for long tenure loans.
  • Hidden Charges – Hidden charges are something that tend to prick the pocket of borrowers the most. Thus, while narrowing down the options, it is advisable to compare the processing fees, down payment, valuation fees, prepayment costs and other charges levied by different lenders.
Bank Processing Fees/Charges
ICICI Bank 0.50% – 1% of the amount of loan or Rs.1500 (Rs.2000 for Delhi, Mumbai and Bangalore), whichever is higher, plus service tax and surcharge, as applicable.
HDFC Bank 0.50% of the loan amount plus service tax and cess, as applicable.
State Bank of India
  • Loan up to Rs.25 Lakhs – 0.25% of the loan amount, minimum charge of Rs.1000
  • Above Rs.25 Lakhs and up to Rs.75 lakhs – Rs.6500
  • Above Rs.75 Lakhs – Rs.10000
Punjab National Bank
  • Loans up to Rs.300 Lakhs – 0.50% of the loan amount, maximum of Rs.20000 plus taxes and surcharge
  • Above Rs.300 Lakhs – Rs.50000 plus taxes and cess
Axis Bank Up to 1% of the loan amount, subject to minimum of Rs.10000

As on April 7, 2014

Making the Choice

Different lenders use different yardsticks for measuring the eligibility of the borrowers. Why shouldn’t borrowers consider doing research and compare several competitive features of home loans offered by different lenders? It is better to have the policies, facts, terms and conditions clarified well in advance before locking in a seemingly ideal home loan with any lender.

If you are searching for a perfect lender to secure ideal finances for purchasing your dream abode, apply for a home loan at https://www.bankbazaar.com/home-loan.html.
YOU MAY ALSO WANT TO: Make sure your EMI fits in your budget – Home Loan EMI Calculator

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