The boom in real estate in the recent years has seen a steep rise in the home loan graph. With affordable interest rates and low down payment, every middle class is finally finding it easier to fulfil the dream of their own home. However, before you go down the lane of a home loan, here are a few things you must keep in mind to ensure that you are able to make a sound financial decision.
What Is a Home Loan
Home Loan is a financial assistance that is provided by banks to its customers to be able to purchase their own property/house with a monthly EMI that includes the interest that the bank charges for lending a loan. For the entire duration of the home loan, the actual property/house stands as a collateral with the bank until and unless you are able to pay off the entire outstanding loan amount.
The very first thing you must determine is your budget and the monthly sum you can spare towards the loan EMI that would go out every month. Since banks mostly cover upto a maximum of 85% of the total cost of the property, you as a borrower are required to come up with the remaining percentage of the cost separately. There may be exceptions wherein the bank covers upto 90% of the total cost of the house and you need to look for the best option according to your budget, savings and requirements.
Basic Requirements For A Home Loan
As such every bank has a different criteria in place for home loan requirements and eligibility but some of the common ones that apply to all home loan applications are:
☞ Fixed and Stable Source Of Income – As home loans can extend upto as long as over 30 years, it is paramount that the borrower has a stable source of income whether salaried or self employed.
☞Solid Financial Record – Home Loans require a very stable and solid form of savings and the financial record must be able to convince the bank of the borrower’s ability to repay over the next course of years. Mostly the EMI for a home loan can be as high as over 40 percent of your monthly income, which is why too many loans are also not a good option.
☞Excellent Credit History – The best indicator of a borrower’s financial health is their credit history. You must have an excellent prior record with no repetitive missed payments or defaults. The bank will check your credit score and have a way of filtering the loan applications on the basis of the credit score of the applicant. If your credit score does not meet the minimum eligibility criteria of the concerned bank, your application will be rejected.
☞Job Stability – It is crucial that you must be a stable employee with no signs of repetitive job changes as that is a red flag for a bank. Banks often consider Job Hoppers unstable, which is why salary proof and proof of employment is a major requirement for a home loan by banks.
☞ Age Limit –In general, the age limit for home loans falls anywhere between 21-60 years for salaried and 21-65 years for self-employed individuals.
Features of Home Loans
☞ Home Loans are usually granted for around 85% of the total house value.
☞ In general, the monthly EMI for home loans can be determined anywhere between 20-40% of your monthly income.
☞ As the home loan is granted on the basis of the house bought, the house is considered as a collateral until the time the home loan is paid in full with interest.
☞ Pre-payment option is available by certain banks which can help you save on the high interest rate.
Tips To Keep In Mind Before You Decide On A Home Loan
Every home loan application varies from the other and it is carefully look over all the details of the home loan. It is best to keep the repayment period as low as you can afford as a longer tenure would make you up end up paying much larger interest rate. Also, research on the customer service capabilities of the bank and the after loan service. Some banks have dedicated relationship managers who can help you anytime with your queries. Home Loans are a huge investment and most banks offer attractive offers and perks, mostly during the festive seasons. Make sure that you keep an eye on these offers so that you can reap the maximum benefit out of your home loan. Compare the rate of interest with other banks, as well as the processing fees, service charges, etc. Check to see if there is any prepayment penalty applicable in case you decide to payoff the loan much earlier than planned initially.
A great credit score and a flawless repayment history can help you negotiate on the home loan interest rates. Ensure you study on the consequences of the different types of interest rates and how that will impact your home loan EMI in cases of inflation, market instability, etc. Make sure you read all the terms and all the conditions that come along with the home loan and ask questions on wherever you are not sure of the procedure. As home loans are generally a one time investment by a middle class man/woman, it is important to do your due diligence and research the best option.
Home Loans @ Letzbank
Letzbank features home loans offers from all the leading financial institutions. Letzbank has tie-ups with different banks and provides customized loan offers that are tailored especially for Letzbank customers and are applicable when customers process their loan application online at our website. Our comparative display of different loan features and ability to compare multiple loan offerings helps you to make the best decision.
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