editor While RBI has maintained a status quo on policy rates, therefore home loan borrowers can expect a lower home loan interest rate for a certain period. At the bi-monthly monetary policy review meeting held on August 6 2021, the RBI has announced to keep the repo rate unchanged. According to a decision, the repo rate will stay at 4%.
Since purchasing a home is easier than before, individuals willing to finance the same can apply for a home loan in India hassle-free at affordable home loan interest rates. However, they must keep certain tips in mind to optimise the benefits of repo-rate reduction and reduced home loan interest rates.
6 tips to consider before applying for a home loan
1. Compare lending rates and charges
Currently, there are numerous home loan providers available in the market. While every lending institution claims to offer the best home loan rates, it is the job of the borrower to do extensive research on available options and find out the suitable current home loan interest rate. The best investment you can make for your future is your own home, so make sure you get the best possible home loan interest rate by comparing lenders.
The home loan interest rate depends on the applicant’s profile. Therefore, applicants must find a suitable lender that aligns with their profile to ensure that borrowing costs are low and do not affect their financial planning and saving.
2. Check various charges
Borrowers must check the various charges that come with a home loan. Understanding your Home Loan Eligibility before applying empowers you to choose the right loan option and negotiate for better terms. These include processing fees, legal and technical charges, administrative charges, prepayment and the foreclosure charges, late payment charges, GST, stamp duty and registration charges and many others. While so many charges are associated with a housing loan in India, one must compare these charges and select a suitable lender accordingly.
Please note, the stamp duty and registration charges vary across the state meaning, the stamp duty and registration charges of Maharashtra and the stamp duty and registration charges Karnataka will be different.
3. Check housing loan eligibility criteria
Once borrowers have selected their suitable lender, the next crucial job includes deciding the home loan amount. Borrowers must be judicious and apply for a home loan in india as per their needs and financial condition.
Usually, lenders offer home loans five to six times of the annual salary of an applicant. Here, borrowers can apply with a co-applicant with a steady income profile to increase the home loan amount. Also, while deciding the home loan eligibility, the lender assesses certain factors like borrowers repayment capacity, property value, etc. Lenders offer a home loan of 80%-90% of property value. Hence, borrowers must choose a lender that offers a high percentage of property value. While tempting, getting 100% of your paycheck channeled into a home loan down payment might strain your finances, consider exploring options with a smaller down payment for a more manageable mortgage.
4. Maximise down payment
After learning about the home loan eligibility criteria, borrowers must pay a higher amount as a down payment if possible. The more down payment one chooses to pay, the lesser the total interest one has to pay at the end of tenor.
In other words, if one chooses to pay a high down payment, they can reduce the total loan amount. Hence, they can reduce monthly expenditure by cutting the cost of EMIs. Therefore, while applying for a home loan, borrowers must try to pay a high down payment amount to ensure a seamless home loan availing experience.
5. Check CIBIL score
Borrowers willing to apply for a home loan must check their CIBIL score beforehand to bag improved offers and terms from the lender. Lenders check credit scores to assess one’s creditworthiness and verify if one is a safe borrower. For example, individuals with a credit score of 750+ can get home loan at a competitive rate from reputed HFCs.
These HFCs extend pre-approved offers to simplify home Mortgage Processing. These offers are also available on other financial products, such as a loan against property. Individuals can check their pre-approved offers by entering name and contact details.
However, individuals with poor credit scores must clear all outstanding debts and take active steps to increase them. Thus, they can get a home loan at better terms.
6. Understanding EMIs and tax benefits
A housing loan is taken for a longer tenor (up to 30 years). Hence, borrowers must choose a perfect combination of EMI and tenor to reduce the monthly burden. Experts recommend keeping EMI within 20%-30% of one’s monthly disposable income.
Further, one can enjoy the home loan tax benefits on EMI payments. Borrowers can claim a tax deduction on interest and the principal amount of the EMI paid. Thus, they can claim a deduction of a maximum of Rs.2 lakh under Section 24 of the Income Tax Act (on interest payment) and a maximum amount of Rs.1.5 lakh under Section 80C of the Income Tax Act (on principal payment).Individuals willing to apply for home loan must follow the tips mentioned above to ensure a seamless home loan availing experience and secure improved terms.
