So you went house hunting and have your heart set on your perfect home. You can cross that off your checklist. What’s next? You need a Home Loan, right? But how do you settle on the right one? Here are a few important factors that you need to consider while choosing a Home Loan.
The amount you will receive as a loan depends on your monthly income. The loan amount will also be decided by the value of the property. A loan amount given out is generally up to 80-85% of the property’s value.
In some cases, the loan amount is more than 85%. Cause to celebrate, right?
Here’s some good news. The Reserve Bank of India, vide a notification in 2015 has allowed a Loan to Value ratio up to 90% for Home Loans amounting to Rs. 30 lakhs or lower.
Remember, a larger loan amount would mean a smaller down payment. Your loan EMIs would be higher, though.
Additional Reading: All You Need To Know About Home Loan Eligibility
The interest rate
The rate of interest on your Home Loan will make a difference to your EMIs and your total interest outflow. Look around carefully before choosing a lender. Get the lowest interest rate on the loan. You should also decide whether you want to take a loan with a fixed interest rate or a floating interest rate.
Additional Reading: Home Loan Interest Rate Guide
Processing charges and prepayment terms
Processing fee? What’s that? This is a fee that banks charge for managing your loan application. The processing fee can range anywhere between 0.25-2% of the total loan amount. You should also find out about the loan prepayment terms from various loan providers before settling on one. Choose a lender that offers the lowest processing fee on your loan.
Loan rate revisions
You should also check how quick a lender is to implement changes in interest rates of Home Loans by the Reserve Bank of India. Get a better deal from those lenders who change rates as soon as policy revisions are announced.
Additional Reading: MCLR Linked Loans – More Affordable Loans For You
Most lenders request the same documents to verify your identity, address, age, etc. in order to process your loan application. There may be some variation in their requirements.
Additional Reading: Home Loan Document Checklist
Different banks take varying durations of time to process and disburse a Home Loan. Most banks take an average of 5 days to approve a Home Loan, assuming that all the documents are in order. Select a lender that has a good reputation with respect to turnaround time and good customer service after the loan is disbursed.
Review all these factors to choose a loan that best suits you, rather than basing your choice only on one or two factors.
Additional Reading: Common Home Loan Problems Faced By First Time Borrowers
Want to compare Home Loan across lenders? BankBazaar can certainly help you there. Just click on the link below.