Moving into one’s dream home is indeed a dream for many, but buying a home is no less a daunting task. There are several aspects to be considered, starting from choosing the property, completing the documentation, and finally getting the home financed. Home loan, in recent times, is a boon for home buyers. However, there are some critical factors involved, which need to be assessed while selecting the financier and their home loan offerings. Here’s what every homebuyer should be aware of before they make the crucial decision.
Loan Amount Eligibility
The amount of home loan that banks are likely to disburse, will typically depend on the value of the property and your monthly/yearly income. The amount of loan is 80 percent of the property value if it is between Rs 30 Lakh and Rs 75 lakh. For properties costing higher than Rs 75 lakh, the maximum home loan permissible is 75% of property value. However, it could be 90 percent in some cases, provided the value of the property is up to Rs 30 lakh, and the buyer qualifies the income criteria required by the financer.
Previously, an LTV (loan-to-value ratio) of 90 percent was allowed for properties that are valued up to Rs. 20 lakh, but in 2015, the RBI through a notification intimated that an LTV of 90 percent can be facilitated for homes that cost Rs. 30 lakh or less. However, whether you are eligible for a home loan at all or not, would entirely depend on your disposable income, your occupation, and the number of dependents in your family. Every homebuyer, before going for a bigger loan amount should also remember that it would imply higher EMIs, as the down payment made by you is smaller.
The Interest Rate
Assessing the rate of interest that is being charged by your financer is crucial because it would directly influence your monthly EMIs and the total interest paid by you at the end of the tenure. Do some internet research, or if time permits, simply ‘go shopping’ for the most competitive interest rates. It is important, as the rate of interest can’t be reversed once you enter a home loan agreement.
Another important factor that needs to be considered is, whether to go for a fixed rate of interest or a floating one. When interest rates are fixed, there won’t be any fluctuations, whereas, when it is floating, the rates might vary on market conditions. For a longer loan tenure, floating rates can prove to be beneficial, but in case of a shorter tenure of 2 to 5 years, a fixed rate of interest works best.
How Responsive Is Your Banker in Changing Its Policies?
While finalizing a home loan, property buyers should make an inquiry about how responsive their financer is, particularly when it comes to changing the interest rates in response to repo rate cuts by the Reserve Bank of India. A clarification on the responsiveness of the banker can benefit you to a great extent not just for now, but also in the long run.
Prepayment Clause
It is crucial to comprehend the terms and conditions set by the lender, pertaining to the foreclosure of an outstanding loan amount. Home buyers should make sure that they fully understand the prepayment clause that is applicable while making a part or full payment of the loan before its normal tenure. Being unaware of the terms and conditions associated with the foreclosure of a home loan might lead to heavy financial losses in future.
Total Turnaround Time and Post-Disbursement Services
Banks, on an average, take around ten to fifteen working days to sanction and disburse a home loan, but this timeframe might differ from bank to bank depending on their internal policies. Documentation related to the property and income proof also plays a vital role in impacting the total turnaround time. Having all the required documents in order can reduce the disbursal time significantly.
Buying a dream home can be an overwhelming experience, which makes most of the people jump into a home loan agreement without thinking about the post-disbursement services. Choosing a financer with a good track record of after-sales service is important, as only a bank with a solid system can provide regular account statements and on-time interest certificates every year. Not having these documents will surely give you a headache, especially when you are about to file your tax at the end of a financial year.
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