The home loan allows you to become the owner of a property and benefit from tax advantages. It helps you create an asset that you can use for multiple purposes. However, before taking out a home loan, you need to consider your budget and arrange the down payment, which is around 10-20% of the total cost of the property.
Once you have the money for the down payment and the property is selected, you can apply for a home loan. The loan must be repaid over a fixed period. You can benefit from tax advantages for the principal loan amount and the repayment of interest.
Let’s look at some things to keep in mind before applying for a home loan.
Borrow what you can afford
You should only borrow what you can afford through equivalent monthly installments (EMI). A home loan is a long-term commitment. You wouldn’t want to miss an EMI or default completely on your loan due to unaffordable loan EMIs. Banks often allow EMIs up to 40% of your home loan payday.
Apply what you need
You need to know your eligibility because if you ask for a high amount that you don’t qualify for, your loan could be rejected. Once you know your loan eligibility, it becomes easy for you to find money for the down payment.
Borrow from an existing lender
Often it is advisable to borrow from the lender with whom you already have an existing relationship. This helps to process your loan quickly because the bank already knows your credit history and personal information and may take less time to disburse your loan.
Make the most of a good credit score
Banks often prefer to give loans to customers with a good repayment history and credit rating. A high credit score helps you get faster approval and disbursement. Banks can also lower interest rates for customers with high credit ratings.
Check property approvals
It is essential to check the legal approvals of the project/property you are buying. It is advisable to have all the authorizations regularly and environmental to avoid litigation later. Also check if the banks have approved the project for loans. It helps in speeding up loan application approvals.
Borrow together for a larger loan amount
If you need a loan for a larger amount but your income does not allow it, you can consider taking out a joint mortgage with your spouse/parents or siblings. You can also borrow a longer term loan. Your NDEs will be lower but your interest will be higher. Avoid making a decision in a rush and consider all the points before signing the loan agreement.
The table below will help you compare the interest rates of around 15 banks and the EMIs for a loan of Rs 50-lakh for a term of 20 years. You can compare and borrow according to your eligibility and needs.
Interest rate and EMI on home loan
Compiled by BankBazaar.com
Note: The interest rates on home loans for all listed public and private (ESB) banks (except small financial banks) as listed on their website are taken into account for the data compilation as of 09 November 2022. The top 15 banks offering the lowest interest rates are listed in ascending order based on interest rate i.e. the bank offering the lowest interest rate lowest interest rate on the home loan (lowest rate regardless of loan amount and term) is placed at the top and highest at the bottom. The lowest rate offered by banks is considered in the table. The EMI is calculated on the basis of the interest rate mentioned in the table for a Rs 50 Lakh loan with a term of 20 years (the processing fee and other charges are assumed to be zero for the calculation of the EMI) ; *NBFC entity.