How To Choose a Home Loan in India

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Everybody looks forward to buy a home, but finance becomes the most important concern. Choosing the best home loan means choosing the best lender to avoid the hassles linked to availing a loan. Hunting an ideal lender is not an easy task. You need to look for a lender offering you the loan that best fits your particular situation.

Selecting a wrong loan can have huge financial implications. Home loans these days are offered by all banks and financial lending institutions. The policies, however, vary to some extent from bank to bank.

If you could cross the eligibility hurdle successfully, then starts the drive of repayments of the loan.  Whenever you plan for a specific lender say, if you are applying for Axis Bank Home Loan, you need to explore carefully to understand what they offer.  Let’s discuss on how to pick the best lender for your home loan.

Interest rate

The lender decides the interest rate considering your loan amount, credit score and loan tenure. Well, there is no denying the fact that even a small difference in the home loan rate can lead to a considerable difference in the EMI you pay.

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It is, therefore, always advisable to go to a lender offering the most competitive rate. Don’t miss to consider that banks follow the MCLR regime for interest rate.

Loan to value (LTV) ratio

Loan to value ratio (LTV) is the ratio of your property value that lenders agree to approve as a home loan. The balance is commonly known as down payment. This amount has to be financed out of your own pocket.

Most of the banks offer only 80% of the property price. However, there are few that lend up to 90% of the property value.  It is important that you explore the market carefully to grab the best deal.

Credit history

A low credit score reduces your chances of getting a home loan from a public sector bank. Even if you are approved; the lender charges a higher rate of interest.

However, housing finance companies take a more relaxed position on your credit score. If you have a low credit score you are recommended to go for a lender that offers loan for low cibil score without much hassle.

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Loan tenure

Generally, banks and NBFCs approve home loan for a tenure of 30 years. However, there are some lenders that offer lower tenures for self-employed people (say 20 years).

If you are planning to avail a housing loan ensure that you finalize a lender offering longest tenure as reduced EMI increases your loan eligibility.

Loan processing time

The time taken to sanction a loan and process the disbursal vary across lenders. Consider finalizing the lender on the basis of the urgency of your loan for building a house.

Builders won’t wait for you; it is hence, advised to go for the one that has a faster loan processing system.

Documentation

Though most lenders seek the same documents, like proof of age, address and income, actual requirements may vary.

Nil foreclosure charges

It is best to choose the bank that does not charge a penalty on loan pre-payment. The exclusion of pre-payment penalty or foreclosure charge ensures fair pricing of home (mortgage) loans with floating rates, and less favouritism between new borrowers and existing customers.

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Processing fee

Lenders charge a fee to cover the range of expenses incurred while assessing your home loan application. This fee is technically termed as processing fees.

Though many lenders charge a set amount as the processing fee, most lenders charge 0.50–1.50% of the total loan amount. This amount is non-refundable even if the loan gets rejected. It is therefore, always advised to go for a lender that charges the lowest.

Hidden charges

There are various secret charges. It is advised not to sign the contract till the time you find the costs reasonable. If you have a steady income and have a good credit score, you can bargain on these hidden charges.

The loan for building a home is a 20 year commitment; so it is important that you choose sensibly. Don’t only run after quick loan. Get in touch with the best housing finance company/ banks to get detailed information on the different kinds of home loans that you can avail as per your need.

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