Your credit history and eligibility have a lot to do with whether you will get a home loan or not. We present the important elements that accompany a home loan.
In today’s times, you are left with no choice but to borrow a home loan to buy the house of your dreams. But borrowing the housing loan comes with its own set of challenges, most of them wrought out of lack of information.
We present the most important elements that define the home loan’s overall affordability:
1 The interest rate.
The most important component of the housing loan is the interest rate being offered. Housing loans in India are offered at a fixed or floating rate of interest. The fixed rate loans are better for those who want a constant amount of EMI. However, the floating rate loans can result in lower EMIs when the market rates reduce. The higher the interest rate being offered, the more expensive the housing loan becomes.
2 Check if you’re better off with a shorter tenure.
You might be comfortable paying a certain amount of EMI for a loan spanning 20 years or more. The longer the tenure, the lower the EMI. However, this model results in more money being repaid to the housing finance company. If you have a reasonably high income and you are confident that you can juggle other expenses with a higher EMI, you should ask for a shorter tenure on the loan. Or if you have already taken the loan for 20 years, you could ask for the EMI to be increased every year. This way, the loan is repaid faster.
3 Check your loan eligibility.
Before you zero in on a posh locality and an upscale house, it might be prudent to check your loan eligibility. Your housing loan eligibility determines how much loan money you can expect to get. Knowing the eligibility helps you streamline your house search and your personal finances. If the eligibility is high, you can increase your budget and look for suitable houses.
4 Get a calculation of the processing charges.
Most first time buyers are unaware of the lending institution’s schedule of fees and charges. For every housing loan in India, there exists a schedule of charges related to the legal and technical evaluation, as also processing fees per application. You must also pay stamp duty on the loan agreement between you and the lending institution. Ask the lender to give you the complete schedule of charges and fees, so that you can keep this money ready at the time of loan disbursal.
5 Do you have the down payment ready?
You cannot pay the entire cost of the house from the housing loan. The lending institution offers only a percentage of the house’s cost as a loan. Leading housing finance companies like Punjab National Bank Housing Finance Limited (PNBHFL) offer up to 90% of the house’s value for loans up to Rs 30 lakh, and up to 80% for higher amounts. This means that the remaining money, as also the stamp duty and registration costs, must come from your own reserves. You must arrange from the down payment first – the booking amount, first instalment, stamp duty and registration costs are all paid before you get the loan amount.