Now a days, lots and lots of people are fulfilling their dream for a home with the help of with easy financing options. Home loan makes it very easy for masses to own a home. Almost all banks and various NBFCs offer home loan ranging from the period 5 to 25 years. You need to explore certain option and compare interest rates, processing fees, and other one-time and recurring expenses.
Home loans are offered considering your income, other liabilities and past track record in other loans, if you have taken any. Better credit score helps you in increasing your chances of sanction of home loan. Generally, the loan amount with EMI in the range of 30-40% of your take home salary are considered.
Home loans are generally cheaper than loan against property and are given only in case you are planning to buy a flat, already built house or upgrading a existing property. Loans on Plots are only given as home loan only if you intend to construct the same. Apart from these you need to be a Indian citizen. You may avail a facility of pre approved loan for a period upto 3 months, even before even identifying a property. However, banks reserves the rights to modify terms and conditions of these sanctioned loans before disbursal of amount.
Fixed rate v/s floating rate
Although banks are always keen in floating rates and offers a good 0.5% to 1% discount on floating rates loan as compared to fixed rate loans however you should decide basis the interest rate scenario. Floating rates are linked to the base rates of the bank which may or may not come down with declining rates in the market. While choosing floating rate, you should be careful with the credibility of financial institution, as several banks start selling new loan at lower rate keeping the base rate still same in declining interest rate scenario. Since home loan are always taken for long duration, various interest rate changes both upside and downside may be seen. As against the fixed rate are same for entire duration.
Fees and Charges
All banks charges some upfront fees while disbursing loans or during the loan tenure. The different types of fees, which are usually charges are as follows.
Processing Fees: Generally it is within the range of 0.5%-1% of the loan amount and may have certain minimum and maximum amount restrictions or the fixed amount ranging between 5000 to 10000.It is negotiable element and may be waived with competition in place. In pre approved loans, lenders charge this fees while approving and may forfeit this if you do not seek disbursal in a given validity period.
Administrative Fees: Very few lenders levy these charges to maintain the loan and is charged periodically (such as quarterly or annually).
Delayed Payment Fees: If your monthly payment gets delayed for any reason, very few lenders may charge this fee.
Prepayment fees : Prepayment penalty on any home loan with floating rate can not be charged now. It is also expected to be removed for fixed rate home loans.
Choosing a home loan
You can choose lender only if several lender are choosing you as a borrower basis your eligibility and credit score. In case you are having few lenders, you may choose them basis following parameters.
1. Interest rates offered
2. Amount being sanctioned
3. The pace of Loan approval and disbursement of money
4. Repayment terms
5. Processing fees and Other charges
6. Past track with other customer record in increasing/decreasing interest rate with interest rate cycle.
Raising a loan with Co-borrower does have its own considerable merits, be it with your spouse, sibling or parents. It not only raises the eligibility of loan amount with clubbing of incomes but also helps in claiming tax benefits for all co borrowers, be it for principal repayment or interest amount paid.
You must read the loan agreement thoroughly before signing it as such you will be able to avoid undesirable clauses and hidden charges. However lender are always reluctant to change terms as such do not hesitate to choose some other lender even at the signing stage. Although you may find several uncomfortable clauses, which may even be contradictory to what your RM has said however you have this as a strong chance to keep your foot forward as your right while taking one of the largest financial decision of your life.
Several Financial institutions offers Insurance as a cover to your loan amount in case of unforeseen circumstance like death of borrower, job loss, loss of property due to natural calamity, etc. Few lender offers these policy free of charge along with loan while few charge separately and club the same with loan amount.