Over the years, the Indian realty market expanded exponentially, thanks to affordable homes and easy accessibility to a housing loan. As per Knight Frank India report,
- In India, housing sales in the top 8 cities registered a QoQ growth of 84% in Q4 of 2020.
- The growth is driven majorly by increasing demand for housing units, which are priced up to Rs.45 lakh. These comprise 54% of new units supplied.
While these data indicate a favourable time for individuals to invest in their property, they need to keep a few factors in mind before applying for such credit. It will allow them to make an informed decision and facilitate hassle-free repayment.
Things to consider while applying for a home loan
Following are some of the aspects that individuals need to consider while applying for a housing loan.
Factors affecting eligibility
The first step of availing of a home loan is checking the standard and lender-specific eligibility criteria. Lenders set eligibility criteria for borrowers to meet and ensure a reduced delinquency rate in this segment.
- The net overall home loan outstanding grew only by 2.6% in April-October 2020 compared to 9.4% the previous year.
Hence, individuals need to assess the requisites before applying for a home loan. For instance, lenders check the repayment capacity of the applicant through CIBIL score and FOIR. Generally, a score of 750 and above is considered suitable to be eligible for the credit. On the other hand, the FOIR is expected to be between 50% and 60%, including the new loan’s EMI; lesser the dependants, the chances of approval are higher.
Along with that, individuals with a fixed monthly income have higher chances of loan approval. Individuals can further maximise their home loan eligibility by applying with a co-applicant. Since, in this case, the co-applicants income is clubbed, lenders sanction the amount applied for easily.
The value of the property is also a factor that can affect your home loan eligibility.
Besides meeting the eligibility, borrowers also need to consider the home loan interest rate while applying for the credit. Generally, individuals need to choose between fixed and floating interest rates while applying for the fund.
As the name suggests, the fixed interest rate does not change with the market scenario. On the other hand, a floating interest rate fluctuates with a market condition like a change in repo rate. The rate decreases with a fall in repo rate and vice-versa.
Nevertheless, the fixed interest rate also accompanies a “reset period” depending on the lender’s internal policy.
Top financial institutions offer a home loan with competitive interest rate and flexi loan facility.
Specific HFCs also extend pre-approved offers that expedite and simplify loan availing process. Besides home loans, these offers are also available on a range of credit products like loan against property, etc. You can check your pre-approved offer simply by entering your name and contact number.
Fine print collection is a must
A home loan agreement is a legal document that borrowers need to check for any discrepancy. Besides missing EMI payment, lenders also consider other factors to declare one defaulter. For instance, some lenders can mark one defaulter if he/she involves in a criminal offence during the tenor.
Apart from this agreement, individuals should also collect a NOC certificate from the lender once the loan is repaid successfully. Constructors may deny transferring the ownership in case one does not have it.
Balance transfer facility
To determine the savings, individuals can also use a home loan EMI calculator. Suppose you have a home loan outstanding of Rs.50 lakh at an interest rate of 12% for the remaining 15 years. If you opt for this facility with a new interest rate of 11.5%, you can save Rs.2.87 lakh on interest payment.
The above-mentioned pointers are some of the crucial factors that borrowers need to consider to apply for home loan with favourable terms and an easy repayment structure.