We all spend a major part of our lives either at our work place or commuting back and forth to work. What is left in our lives is what we spend in our homes. But still, the magic thing about home is that it feels good to leave, and it feels even better to come back.
The starting place of love, hope and most importantly all our dreams, owning a house of our own which we can call our home unfortunately remains just a dream for many of us.
How magical is the feeling of owning that safe place where we can go as we are and not be questioned is something which can be felt only by those who own one.
The ache for home lives in all of us. Today, fortunately there are many options of availing home loans from financial institutions and Banks which can make this dream of ours, a reality.
Availing a Home Loan may be easy, but most often than not, the burden of high EMIs, spiralling interest rates and high processing fees remain a discouraging factor resulting in either we continuing to live in a rented house or even after taking a home loan, end up burdened with the mortgage for the rest of our lives.
Once you have found a house you like and which fits your budget, it is imperative that you choose the right lender who will provide you the home loan for purchasing your dream house.
A few important factors need to be kept in mind while deciding the financial institution of your choice.
Your Loan eligibility:
The two important factors which decide your loan eligibility are the level of your annual income, and the value of the house. While Banks finance 80-85%, housing finance companies finance 90% of the property value; the eligibility will get capped depending upon your age, occupation, disposable income and number of dependents.
It is always easy to get tempted by higher percentage of finance offered by some institutions, but what we need to keep in mind is that a bigger loan would certainly imply lower down payment at the beginning, but a higher EMI for the rest of the tenure.
The rate of interest:
Perhaps the most important factor to be considered before zeroing in on a home loan is the rate of interest. The ROI influences the EMI and considering the fact that home loans are for longer tenures, a slight difference in interest rates makes a big impact on the total interest paid by you. A quick check with a Home Loan EMI calculator will benefit a prudent decision making.
Apart from shopping for the most competitive ROI, you need to decide whether to go for fixed rates or floating rates which vary according to market conditions. For shorter tenure loans it is advisable to go for fixed rates and choose floating rates for longer duration loans, although fixed rates would generally be between 25-100 basis points higher than floating rates.
These charges are required to be paid upfront by the borrower before disbursement of the loan and hence add to the cost of the purchase. It is imperative that are clarified and understood before choosing the lender.
Apart from the charges of the financing institutions, which may vary from 0.25% to 2% of the loan amount, you need to understand whether any charges for valuation, title clearance, documentation etc. are included in the same or are levied over and above the processing fees.
It generally happens that the loan applications are submitted and then Banks start asking for further documents and papers which either delays the process or even sometimes becomes difficult for you to submit.
The entire list of documents that are required for the home loan should be understood and a check list may be made whether you have all these in your possession before applying for the loan. Financial Institutions which provide a list of these documents on their website itself makes the work easier.
Turnaround time in disbursement:
It is necessary to clarify with the financing company before the application itself as to how much time it would take between the sanction and disbursement.
While ensuring that all documents are in order, the time taken for disbursement of a loan from the date of sanction should be between 1-7 days.
Responsiveness to interest rate fluctuations:
Even though you have chosen a fluctuating rate home loan, many institutions do not proactively reduce your interest rate on every reduction of repo rate by the RBI.
It is advisable to do a check on how responsive the financing company has been in the past to change their interest rates following policy changes by RBI, which will give you a fair idea of expecting a fair deal from them not just now but also in the future.
The terms relating to prepaying a part or full amount of the loan before its agreed tenure should be understood very clearly before choosing a lender.
The terms relating to settlement and/or foreclosure of the outstanding amount or transferring the balance to another lender ends up adding a substantial cost to the loan and hence should be clarified before sanction of the loan.
Choose the home loan lender that is best suited for you once you have judged them on the above parameters.
Find a House you like…..Create a Home you love; with the home loan of your choice.