This article gives home loan seekers the muchneeded information to choose the best home loans offered in India. A home loan or a housing loan is usually taken to buy, construct or renovate a house. Both banks and NBFCs offer home loans in India. Choosing the best home loan is a daunting task. If you are availing a home loan for the first time or have already availed a home loan, you must be aware of the recent developments.
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Why do you need a home loan? Define your requirement first and then choose the home loan. Choose the land purchase loan if you want to buy a plot of land. Land purchase loans are sanctioned up to 80-85% of the market price of the property under consideration. Get a homepurchase loan if you are planning to purchase a residential property. Banks also offer home construction loans to those willing to construct a new house. You also have homeextension loans to expand your property and homeimprovement loans to renovate the house. If you are an NRI who wants to buy a property in India, consider taking NRI home loans.Choose the product that best matches your requirements.
See Also: Does Home Loan Really Save Taxes?
Not everyone is eligible for home loans. After selecting the loan type, understand the eligibility criteria set to get that loan. The age, income, employment stability, credit score, the brand identity of the employer and financial history of an applicant matter a lot while granting or taking a home loan.
If you are eligible for a home loan, then decide the loan tenure and the loan amount. Many home loan seekers opt for longer loan tenure to reduce the EMIs without taking into account the cost of the loan. This is actually a mistake.
If you take a home loan for Rs 50 Lakhs at 10% with tenure of 20 years, the Home Loan EMI would be Rs 48,251. Over 20 years, the total interest you payis Rs 65,80,260. If you opt for loan tenure of 25 years at the same interest rate, the Home Loan EMI falls to Rs 45,435.
But, the interest outgo is Rs 86,30,511. Longer loan tenure means a higher interest outgo. Therefore, check the home loan amount and the loan tenure, before committing to the home loan.
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The interest rate is fixed in case of a fixed rate home loan and changes in case offloating rate home loan. Opt for a floating rate home loan if you anticipate a fall in interest rates (Falling Repo rate scenario).
If you are expecting a sharp rise in the interest rates (expecting repo rate to increase continuously over time) then, opt for a fixed rate home loan. If you cannot make a decision, opt for a combination of these two types. In this case, your interest rates are partially fixed and partially floating. Floating rate home loans are popular vis-à-vis fixed rate home loans, because of the flexibility they offercustomers.
Be wise while choosing the bank for home loan. There exists cut-throat competition in the market. Many banks offer home loans at lower rates to attract customers. Shop around for home loans and select the most promising one. Check processing feeswhich differ across banks. Processing fees can be anywhere between 0.25% to 2%.
Choose the bank which offers the lowest processing fees, other things being equal. Documentation is another important aspect to be considered. Do not forget to consider the turnaround time, which is the time required to sanction a home loan. Usually, banks require 5-7 business days, if all the documents are in place. Check the brand reputation of the bank or NBFCvis-a-vis customer services.
The demand for home loans has increased significantly in recent times. Banks continue to offer promising deals in response to the everchanging needs of the customers. Make a comparative analysis to find the best home loansin India.
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