The Indian real estate market saw a record investment of ₹17,600 crores in the first quarter of FY19, according to consultancy firm Cushman & Wakefield. A majority of people who invest in a house opt for financing. Taking a home loan could be one of the most important financial decisions you make. Hence, it is best to research thoroughly before taking a home loan. Here are 5 things that you need to take into account before opting for a home loan:
Eligibility
Apart from your income, your eligibility to get a home loan depends on a variety of factors- your occupation, the organisation that employs you, your current financial obligations, history of employment, and age among others. The rate of interest may vary with these criteria too. Apart from this, your entire credit profile is considered when banks calculate home loan eligibility. This is done to get an idea of your ability to repay the loan. Having financial obligations can lower your eligibility, while you can improve the chances of your approval by having a co-applicant with a high credit score and good income.
Floating or Fixed?
Generally, there are two types of interest rates offered by banks, fixed and floating. In the case of the former, the rate of interest remains constant from the time the loan was sanctioned, despite fluctuations in the financial market. On the other hand, when the interest rate is floating, it can fluctuate depending on market conditions. So, the interest rate doesn’t remain the same from the time the loan was sanctioning. You can choose among them according to your obligations and financial standing. A house loan calculator can help give you an idea of how much you will be paying towards your home loan over the years. This can help you make an informed choice.
Amount
You can typically receive financing for as much as 80% of the value of your house. In some cases, the loan amount can change based on your income and certain other factors. Banks usually agree to sanction an amount that translates to around 40%-50% of your basic salary plus dearness allowance. If you have existing liabilities, such as a car loan or a personal loan, their EMIs would be deducted from your income. The loan amount is calculated after taking all these factors into account. A home loan calculator can help you get an idea of this.
Balance Transferring or Changing Lender
People taking loans also have the option to change their current lender for another one. This shift is typically made if another lender offers a lower interest rate. However, it is important to remember that a prepayment penalty may be levied when you opt for a new lender.
There are a plethora of financing options available in the market, with easy repayment schedules and flexible interest rates. Take your time to compare the features and offerings of each of these. You can also approach your financial manager for clarifications. Also, you can use a home loan instalment calculator to determine the EMIs that you would be paying towards your home loan.