How to Choose the Right Home Loan: 6 Expert Tips

Securing the ideal home loan often proves to be a daunting task, just like finding the perfect home. With a myriad of financial institutions offering a plethora of attractive loans and deals, choosing the right loan or lender becomes a significant challenge. In this article, we will discuss the five essential factors you must consider to secure the best deal.

TIPS TO CHOOSE THE PERFECT HOME LOAN

Loan From Banks Or NBFCS/HFCS:

You can acquire a loan from a bank, a non-banking financial company, or a home finance company (NBFC/HFC). However, most people prefer bank loans because of the interest rates. Since the loan interest rate given by the bank is linked with a benchmark, i.e., the Repo rate, it offers a lot of transparency, and the rate benefits are transferred to the customer faster. On the contrary, the interest rates offered by NBFC/HFC are tied to their internal benchmark called Prime Lending Rate (PLR), which may not always transfer the interest rate benefits to the borrower quickly.

Interest Rates:

Interest rates are usually critical when looking for a loan. However, they are significant when it comes to taking a home loan. Given the amounts involved, even a slight change in the interest rate could result in higher payments. Therefore, your first step should be to conduct a comparative analysis of the interest rates provided by different lenders before moving on to any other factor.

LTV Ratio:

The loan-to-value ratio is the maximum home loan amount to the property's value. Any remaining amount is to be paid by the borrower to the lender in the form of a down payment. This ratio varies from lender to lender.  As per RBI rules and regulations, a lender can only lend up to 90% of the property value for loans up to ₹30 lakh, and if it is above the threshold, lenders can lend 75-80% of the value.

Eligibility Requirement:

Lenders usually grant loans to people they know can repay the loan after a stipulated amount of time. Before taking out a loan, you need to meet a few eligibility requirements, such as your income level, age, CIBIL score, and others. To check your home loan eligibility, you can visit any financial institution's website and use the home loan eligibility calculator. This helps you understand how much of a loan you would be eligible to receive.

Loan EMI:

The next thing on the list to consider is Equated Monthly Instalments (EMI). Your EMI depends on the loan amount taken, the downpayment amount, and the interest rates. Ensure that the EMI amount you take is affordable and accessible to pay. You can also use a home loan EMI calculator to determine this amount.

Processing Fees:

Lenders charge a processing fee on your home loan application; this varies from lender to lender. Banks usually charge up to 2% of the applied loan amount. Compare the processing fee with other lenders, as it will help you make a better deal.

CONCLUSION

In conclusion, choosing the right home loan requires careful consideration of various factors. By meticulously comparing these aspects across different financial institutions, you can secure a home loan that best suits your financial situation and helps you achieve your dream of homeownership. Always compare lenders to make the best deal possible.