Introduction
If you have decided on the property you want to buy, the next step is to look for a home loan. With the ongoing pandemic the property prices are subdued and have corrected by around 10% to 15%, and interest rates too are on the lower side. Lot of people lost their jobs and companies had to cut salary of employees as businesses slowed down or came to a halt due to the ongoing pandemic. So, for people who continue to have a steady income, it is a good time to buy your dream property.
It is important to compare loans and interest rates online before approaching a bank for loan.
Sometimes banks have options of a discounted processing fee or even a waiver. Check details properly before finalising a loan. Here are a few tips that may come handy to you, if you have already identified your home and looking for a loan.
1. Home Loan
Due to the ongoing pandemic not only property prices have softened but interest rates have declined too. Government owned banks have reduced interest rates to as low as 7%. There is also subsidy available on Pradhan Mantri Awas Yojana. For the first time home buyers specially if they are going to be the end-user it is an apt time to purchase a house.
2. Comparison
Always compare interest rates of different banks before finalising the loan. Individual bank charges differently depending on loan amount, your profession, amount of down payment, and credit score among others. Therefore, the best home loan interest rate for you will be based on your specific parameters.
One can take home loans from banks or housing finance companies (HFC). The HFC’s don't have to follow RLLR mechanism and they can set their own rates based on their cost of funds. Usually, the public sector banks offer the cheapest home loan interest rates to the eligible home loan borrowers but their process of sanctioning and disbursing loans takes longer than that of private sector banks and housing finance companies. Therefore, for people who doesn't fit in to get a loan from a public sector bank, due to stringent paper work, can opt for housing finance companies.
Quick Facts
- Around the world, housing is regarded as a means of long term wealth accumulation and financial stability.
- India's growing population of 1.4 billion (as on 23rd Nov 2020) people living in an area of 32,87,263 square kilometers. The density of population works out to ~426 persons per square kilometer
- Only ~45%* of the housing in India are considered as good per certain standards.
- The demand for new housing is increasing everyday.
3. Down Payment
Irrespective of the bank you choose try to make as much down payment as possible. The more down-payment you will be able to pay lesser will be your interest cost as you will have to take less amount of loan. Your monthly EMI will be lower if you manage to pay more down payment.
4. Prepay Plan
Whenever you apply for a loan always work out on a prepay plan. Paying loan for the full tenure will actually make your house costlier. You can save money and repay in tranches like in every quarter or after six months. In the initial years you pay more interest and less of your principal amount is deducted. The earlier you repay better for you. If a person takes a loan for 15 years or 20 years, the interest cost becomes a substantial portion of the loan amount. By repaying at the earliest try to reduce your interest cost.
Conclusion
Try to find the best home loan lender by considering the above factors that makes life easier a bit over the time. As the typical tenure of a home loan payment schedule is around 15 years, it's worth spending some time upfront, and get an advice from an expert tax consultation before taking a decision.
