Six Things to Keep in Mind Before Taking a Home Loan
For most of us buying a home is one of our biggest ambitions. Home Loans have become the most common means of translating these dreams into reality. While it might seem that all banks or NBFCs are eager to lend, getting a Home Loan sanctioned and disbursed can prove to be a tedious task.
Types of Home Loan
Home Loans are of two types, based on the rate of interest – fixed and floating.
The interest rate of a fixed rate Home Loan does not change with market fluctuations.
In case of a floating rate, the prevailing market conditions determine the rate of interest on Home Loans and the interest rate is normally 1 to 2.5 per cent higher than a fixed rate. These rates can fall with the market rates, but can also rise with them. Clauses vary by lender.
Eligibility Criteria and Factors that Affect it
– Calculating the EMI is a snappy way to calculate your Home Loan Eligibility. The installment amount is generally limited to around 50-80% of the borrower’s salary (basic salary plus dearness allowance). The eligibility would reduce further if you have any existing liabilities, like another loan. Calculate EMI’s for your loan here
– Some banks can also be sensitive to the number of dependents you have. Higher number of dependents implies lower capacity for repayment.
Type of Employment
– Someone with a stable source of income like a salaried person will find it comparatively easier to get a loan approved than someone with fluctuating earnings say a self-employed person.
– Commonly, lenders cap the loan amount around 80% of the total value of the property or the approved sanction amount, whichever is lower. Click here to check if you are eligible to take a Home Loan
For example, if you have a salary of Rs.13 lakh p.a. and you’re eligible for a Home Loan of approximately Rs.50 lakh. However, the property you are buying costs Rs. 48 lakh. Therefore, you will be sanctioned a loan of up to Rs. 38 lakh.
– Age too plays a significant role in determining the tenure of the loan, as your re-payment capacity is directly related to the number of potential earning years you have. On a general basis, loan tenures do not extend beyond your retirement age, unless you have a younger co-applicant. If the income of the co-borrower is also clubbed, you may get a higher loan amount approved.
The Fine Print
Being a legal document a Home Loan agreement is often incomprehensible. You might be surprised to find lots of loopholes hiding within the details. The term ‘default’ might give you the impression that it is the non-payment of your EMI. But some banks may define default as when the borrower expires, or in case joint applicants are divorced, etc. So, understand the fine print. Frequently Asked Questions
In a situation where another lender offers you a significantly lower interest rates, you can always switch. It is important to ensure that the lender does not charge you any penalty on the foreclosure of your loan. Processing fee might be the only additional cost you have to bear. Calculate your Home Loan EMIs basis a new interest rate.
Things to Look for in a Home Loan
- Interest rates
- Loans which offer separate amounts exclusively for home improvement
- A refinancing option wherein you can avail a loan up to the registered value of your property
- Part-prepayment facility which allows you to prepay at no extra charge
- An option to foreclose the loan anytime during your loan tenor at no extra charge
- Flexible repayment options
The Smartest Home Loan Option
Bajaj Finserv offers India’s first and only online Home Loan approval. With a 5 minute approval and 72 hour disbursal, against over 2000 pre – approved properties, it is surely one of the smartest ways to take a Home Loan, and at an unbelievable interest rate.
Further, a Home Loan from Bajaj Finserv has other unique benefits such as Home Loan+, Flexi Loan and 3 EMI Holiday, etc.