In an ideal situation, everyone is supposed to have enough resources to finance all his needs and desires. However, in reality, some people are not lucky enough to meet all their requirements. Many of you need to borrow to fulfill your goals. Often there is a wide gap between aspirations and reality and this is exactly why the NBFCs and banks come into the picture. You could get housing loans by applying to these financial institutions. With the advancement of technology the lending industry has undergone a dramatic change. Today you have easy access to online aggregators that assist customers in identifying the cheapest loans and in many cases banks and NBFCs approve and disburse housing loans in record time. You think about buying a home depending mostly on how much housing loan you could arrange. However, before you think of borrowing, you must consider a few important factors while choosing a housing loan in India.
Check the Affordability of EMI
The most vital factor that affects a housing loan choice is EMI from the borrower’s viewpoint. EMI is actually the monthly outflow which would be going towards loan repayment for a minimum of next 10 to 15 years. It is a wise decision not to go overboard and stay practical while choosing the home loan. Do not assume that you would be earning more in future and do not commit to a home loan depending on such an assumption. You should never allow your EMI go over 40% to 45% of your current net monthly income. In case you are earning more in future, you have the option of pre-paying your home loan with your extra disposable funds. You must keep in mind that most banks would not be slapping any pre-payment penalties.
Decide Type of Interest
Housing loan interest rates are the trickiest. Home loans usually come with either fixed or floating ROI (Rate of Interest). Fixed ROI implies that your housing loan interest rate would not be changing and would remain constant during the entire loan tenure or for, at least, five to ten years. Floating ROI, on the other hand, would imply that rate of interest could be changing as per government policies, RBI norms or even market conditions anytime. You should choose fixed ROI if you think that ROI is low and from now on ROI is going to increase. You could consider switching between floating and fixed ROI anytime while your home loan tenure is on but find out if there are any switching charges.
Find Out Down Payment Affordability
Once you determine exactly how much EMI you could afford, you must examine how much you are going to shell out from your pocket. You must pay at least 20% to 25% of the entire property value as down payment. No financial institution would be giving you 100 percent housing loan. In this context, you must assess your housing loan eligibility. See if you are eligible to apply for the home loan amount, you are thinking of.
If you are looking for a loan higher than what you could afford in terms of EMI, you could consider opting for a longer tenure. This would effectively be reducing your EMI. Many banks would be granting you a higher loan amount. However, you would end up paying more interest eventually but you would be getting the home loan at pretty affordable monthly cost. You could pre-pay the loan to cut down the loan tenure.
You must without fail get a proper home insurance once your loan amount has been disbursed. This ensures that in the event of any mishap, your family and loved ones could go on living in this house. It would then become the responsibility of your home loan insurance provider to pay off the entire pending loan amount.
It is a good idea not to take hasty home loan decisions. Always compare the quotes from two or more NBFCs and banks and choose the best suitable, keeping the above factors in mind. Once you have determined your affordability and the specific lender, you could do ample research and go through home loan guides that would help you through the process hassle-free and smoothly.