Housing finance companies, banking institutions, and non-banking financial institutions have proliferated in the market over the past few decades. Due to this proliferation, there are too many home purchase loan options available to purchase a house, a plot of land, or apartment property nowadays. However, with too many options, there is always the chance for confusion to creep in. Every lender has terms and eligibility criteria that they consider before giving a home loan. As a borrower, you must understand these terms and criteria to make an informed decision about choosing the best housing loan.
Considerations for Choosing the Best Home Loan in India
1) Look into Hidden or Processing Charges:
Different lenders give varied loan term offers to you, and the best home loan offers may not be the ones that charge the least interest rates. You need to know that only getting a low interest on the loan may not be enough to make it cheaper. Lenders also have different charges they take from you, like loan processing or legal charges, which will make you pay higher borrowing costs. Moreover, you will not want to do this as you end up shelling more money out of your pocket in the long run.
2) Compare the Loan-To-Value or LTV Ratio:
The loan-to-value ratio varies from one lender to the other and is an essential factor to consider before you apply for a home loan. The lenders will look into the valuation of the property or home you want to purchase and decide on the percentage of loan they can give you. Usually, they provide 75% to 90% of the property’s value, depending on the lending institution and their eligibility criteria terms. Making sure you compare the loan-to-value between different lenders ensures you get the maximum loan amount possible.
3) Choose the Best EMI Tenure:
Your monthly installments directly impact your financial position and can be stressful. Therefore, before you apply for a housing loan, it is critical to calculate in advance the amount of money from your income that you can shell out to repay the loan. Trying to take a short loan tenure to clear the loan as early as possible could affect you adversely and leave you with less money for other expenses. The better solution for you would be to increase the repayment time and have enough money to pay the other bills and commitments. So be weary of this fact and don’t overburden yourself.
4) Check for Better Prepayment Terms:
You may be in a rush to finish your home loan early, especially when you get some extra money. For this purpose, you need to look into the prepayment terms the lending institute offers before signing up for it. Also, this consideration for the best home loan allows you to save money by having to pay less on overall interest amounts because you can finish the loan before the specified tenure. In addition, you will be more peaceful and relieved if the loan is over, which is more important.
5) Consider the Speed & Simplicity of Processing:
If you want to save time, it is vital that you choose an efficient lender who is swift and do not complicate your life with too much documentation. Once you have provided the required documents, it is not difficult to obtain an instant home loan as the process involves verifying your details, professional background, and property documents, after which they give you the loan offer letter with all the terms of the loan. Most lenders get this process done quickly without giving you much runaround. Therefore, ensure speed and simplicity before applying to any institute.
6) Compare Interest Rates:
Getting a less-interest home loan is not only about the rate at which the lender offers the loan, but it is essential to consider the type of interest the lender offers. Banks and other lending institutes usually offer two kinds of interest rates. Firstly, it is a fixed interest rate which means that no matter what, the rate will remain the same throughout the loan tenure. The other type is the variable or floating interest rate, which changes based on the Repo Rate that the Reserve Bank of India decides, which may increase or decrease over time.
7) Check the Eligibility Requirements:
Every lending institution has its eligibility criteria which you will have to meet before they can qualify you to apply for a low-interest home loan. So you will have to check and compare these eligibility requirements of different lenders and should be able to meet them before choosing the home loan provider. However, tools are available that help you determine whether you meet the eligibility criteria and how much loan they are willing to offer. Most lending institute websites have these tools available for you to use. Some lenders’ websites even allow you to compare different home loan offers.
8) Research about the Lender:
Before applying for a house loan, learn more about the bank or financial institute and the terms they offer. It is also essential to check their lending history, past rate of interest they have given, and their financial stability. The reputation of the lender and the reviews on their website will give you a clearer picture of the institute and help in deciding whether you want to borrow from them. The objective is to ensure you get the best and cheapest home loan.
The complete process of choosing the right home loan and the appropriate lender is tedious. It requires you to study, research, compare, and select the correct one. These considerations are not only many but also varied across the many lenders present in today’s competitive market. Every lender competes against each other to get your attention and offer different terms and permutations. Therefore, it is your responsibility not to blindly take up a loan based on just one factor but consider everything together. After every consideration, choose the best home purchase loan because a home loan is a long-term financial commitment that could last your lifetime.