The prospect of buying a new property is always exciting, particularly for first time buyers who hope to make their new house, their dream home. However, it is commonly acknowledged that real estate prices often make it difficult for the average Indian to fund the whole purchase at once, and that too out of their own pockets. No matter how much thought we put to it and how earnestly we save, very few of us are empowered to bear the whole cost ourselves in one go.
This is where a home loan can help. Home loans are secured mortgage loans sanctioned to you to help you buy a property – either new or second hand. Note that this loan is not valid for properties that will be self-built, or commercial properties. Home loans help individuals buy residential properties from recognised developers or legitimate sellers by sanctioning up to 90% of the property’s value as the loan amount.
Like all loans, home loans too have to be repaid in the form of EMIs over a mutually agreed repayment tenor, against an interest rate based on which the interest component of your home loan repayment amount and EMI is decided. Most lenders offer a lengthy repayment tenor that can even stretch up to 30 years, allowing for easy and comfortable repayments at the borrower’s pace. Home loans have a lot in store, provided you have the eye for the right one. The search is not difficult; it is just a smart one.
Like all important things in life, the decision to avail of a housing loan must be well thought through, and well researched. This not only helps you get the right deal with a lender who is best matched for your needs, but also helps you avoid unpleasant disappointments such as unfavourable lending terms, or worse – home loan rejection. To help you start your search, we have compiled a list of home loan do’s and don’ts, for your easy perusal.
Home Loan Borrowing Tips for Aspiring Applicants
If you’re gearing up to apply for a home loan, ensure that it isn’t a knee-jerk reaction, but a deeply researched one, so you can enhance your chances of securing a low interest rate home loan along with other favourable terms. Here are some the points you should factor in, before zeroing in on the lender and applying for your home loan.
Tally Your Home Loan Eligibility
One of the biggest criteria that lenders consider at the time of gauging your loan application is your home loan eligibility. Before we emphasise on its importance, let us first understand what it is. Your home loan eligibility is essentially a snapshot of your real ability to take on a home loan of the size you have requested, and your ability to repay the amount back in full, without delays or defaults. This is determined on the basis of the following aspects –
- Credit Report and Score
- Income and Employment
- Ongoing Debt Obligations
- Repayment Capacity
- Property Profile
Compiled together, all of these prove to the lender that you are a reliable borrower who can be trusted with a sizeable sum at reduced interest rates, as you will repay the loan on time, without risking the loan turning into a non-performing asset. Having a high home loan eligibility is crucial to you receiving your sanction with favourable terms. To help with that, ensure that you look up the eligibility criteria beforehand so you can tally your current eligibility before you apply for a home loan. This not only helps you pick a lender who is most likely to offer you attractive deals, but also gives you the time to employ corrective measures if there is a need.
Don’t Overstretch Your Repayment Budget
While home loans afford us the privilege to leave our savings untouched and repay the loan amount in instalments, applicants should understand that the amount they seek, should be an amount that can be accommodated into their repayment budget. Biting more than chew can hold some serious repercussions, as defaulting on your home loan repayment will not bode well for you and could even lead to legal actions from the lender.
Not just that, but it can also affect the future goals and aspirations you have set out for yourself and your loved ones. If all your financial resources are sunk into repaying your home loan for the next foreseeable decade, it will leave you with very little to invest or spend on other important things, such as education, vacations, medical emergencies, or family milestones.
Request for Flexible Repayment Options
Another add-on that will help you in the long run is the facility of making flexible payments. Most home lenders do offer a tenor that can go up to 30 years, but several also offer customised repayment plans that aim to ease your repayment burden. Ensure that your eligibility is at a maximum to be able to benefit from these programs, as they can lighten your repayment load considerably.