The Top-5 Factors You Need to Consider Before Availing a Home Loan
Property has, since times immemorial, remained a favourite investment option for millions of Indians. Whether you want to live in the new home or plan to sell it with a profit, nothing can beat the satisfaction you can get from a house.
A home loan makes the process of home buying easier. Knowing the top factors discussed in this article can help you choose the best loan for your needs.
Check the Property’s Worth
The home loanamount depends on the property’s market value. Generally, lenders want you to pay around 10% of the loan amount as the downpayment – the rest 90% you can availhome loan. Remember, the higher the property value, the higher the loan amount. And, the higher the loan amount, the more EMIs you will need to pay. Hence, before applying for a home loan, it is wise to calculate the total cost of repayment and the loan term to ensure it does not appear a burden.
The Stability of Income
Home loan is a long-term liability. You may opt for a loan term of up to thirty years. Before applying for the home loan, you should analyse your income level and spending habits. If you are certain that your income will remain the same or increase in the times to come, you can choose a high loan amount. However, if you feel that there might be an interruption in your earnings, you should think over the loan amount. It is also advisable that you create an emergency fund that can take care of six-months’ EMIs to avoid a default.
Indian lenders analyse the credit profile of a borrower by looking at their credit score and report. The credit score is an accurate indicator of a borrower’s financial profile. If your credit score is comfortably above 800, you can expect faster home loan approval and attractive terms. Hence, before applying for a home loan, it is wise to take steps to improve your credit score. A higher credit score will give you more negotiating power.
The Interest Type
Indian lenders offer two types of interest rates to home loanapplicants. The first is the fixed rate. In a fixed rate, the interest rate of a home loan remains the same throughout the loan term. If you opt for the fixed rate, you do not need to worry about interest rate fluctuations. In contrast, the floating rate of interest might change every quarter. As a fact, the interest rates have been continually declining for the past few quarters. If you are certain the rates are slated to decline further, you may select the floating rate.
The Type of Property
As the home loan is a secured loan, lenders also consider the saleability of the house while determining the interest rate. If your house is in a locality with good amenities and better connectivity, the lender will consider the loan as less risky and approve a higher loan amount at a low interest rate. However, if your property’s resale value is less, lenders may hike the interest rate.
Applying for a home loan is a life-changing decision. Ensure to keep these top factors in mind to choose the best loan.