Purchasing your dream home is a big decision, and considering the steep real estate prices, it may be critical to opt for financial assistance in most cases. To fund this purchase, a home loan is the right financial instrument to opt for as it has a long tenor and offers ample finance. Moreover, some lenders offer an attractive home loan interest rate, and this facilitates comfortable repayment. However, to enjoy these benefits, you need to meet the lender-specific home loan eligibility criteria.
For a first-time borrower, these loan processes and requirements may be tricky to navigate. To ensure that you understand these nuances and avoid common pitfalls, take a look at the top 6 tips to get a home loan on affordable terms.
Maintain a high credit score
As a first-time borrower, the key factor to consider before applying for a home loan is your credit score. It is one of the crucial aspects of the home loan eligibility criteria. Lenders look for responsible borrowing behaviour, and a credit score of 750 and above is indicative of this. This helps you get a more affordable home loan interest rate along with other perks.
Apply with a co-applicant for the home loan
The benefit of applying with a co-applicant is that this increases your home loan eligibility, if your co-applicant has a good credit score and income. This is because the responsibility of the loan is now shared by two people and this reduces the risk incurred by the lender. What’s more, applying with a female co-applicant, like your wife, mother or sister, may also help you secure a lower home loan interest rate. Lenders often offer women concessional rates on home loans.
Choose the right interest rate type
There are two types of interest rates applicable on a home loan and choosing the right one depends on your risk appetite and the prevailing rates. With a floating rate of interest, the home loan interest rate changes based on the market conditions. It can increase or decrease, and the change will affect your total outgo.
On the other hand, a fixed home loan interest rate does not vary and remains constant until the reset date. This is a better option for risk-averse borrowers as there are no unexpected costs and you can safely plan repayment right from the start. However, floating rates are usually cheaper compared to fixed rates at the onset, and these also allow you to make part-prepayments at no charge if you’re an individual borrower. So, weigh the pros and cons and then opt for the right rate.
Identify the best tenor
The repayment tenor of your home loan is crucial as it affects the EMIs payable. Generally, a long tenor loan translates to a low EMI amount, but increases the total interest you owe as you end up servicing the loan for longer. Alternatively, a short tenor loan results in a high EMI amount, increasing your monthly outgo drastically, but also lowering your total interest payment. With the help of the home loan EMI calculator, you can choose the best option based on your monthly budget and financial goals.
Check the loan to value ratio
The loan to value ratio for a property is the percentage of the home loan amount you borrow against the current market value of the property. A higher down payment from your side will result in a lower LTV and reduces the lender’s risk. Lenders may be open to offering you more suitable loan terms, including a more competitive home loan interest rate when you borrow a lower amount.
Inquire about the associated charges and the fees
Home financing institutions have varying terms and conditions, including those that apply to the applicable fees. Inquire about such charges before you finalise on any loan because these can amount to a high sum. For instance, lenders will charge you a processing fee, among other, as part of the administrative work they do. This is charged as a percentage of the sanction and can amount to quite a lot of money. In addition, you may have to pay bounce charges, penal interest, loan statement charges and more. Being clear about these can help you plan better and even negotiate for lower charges with a good profile.
With these details about home loans, you are equipped to identify a deal that’s truly favourable. In this regard, a good option to consider is the Bajaj Housing Finance Limited Home Loan. It offers a competitive home loan interest rate, a flexible tenor of up to 30 years and a high-value sanction. To qualify, simply meet the easy home loan eligibility criteria and submit the minimal documentation required to process the loan. In fact, the loan also has swift processing protocols, thus ensuring hassle-free access to funds, so long as you have a healthy financial profile. For easy access to the benefits on offer, simply apply online by filling out the application form.