How to choose the best home loan suitable for you?
Home loans help you to fulfill your dream of buying home well ahead of time without having money in your hand. However, there are certain points which you need to keep in mind before you choose the best home loan suitable to you. I am providing some important tips which you need to consider in choosing the best home loan in India?
What is Home Loan?
If you are already familiar, skip this section. This is meant for those who are new to this section.
A loan which is given for the purchase of property like a flat or independent house or commercial property is termed as Home loan. When you take a home loan, monthly instalments (EMI’s) need to be paid to the bank during the tenure of the home loan.
Also Read: SBI Max Gain Home Loans – Why this is unique home loan scheme?
How to choose the best home loan suitable for you?
There are few points which you need to keep in mind before approaching any bank or financial institution for a home loan in India.
1) Choose Lowest Interest Rates: This is very simple to say, but a little complicated to understand. Banks or financial institutions would indicate home loan interest rates with terms and conditions. You should choose lowest home loan interest rates as one of the main criteria where there are no or less T&C. Generally, home loan interest rates are offered between 9.75% to 14% interest rates.
2) Floating Vs Fixed Interest rates home loan: Another important factor is floating rates Vs fixed interest rates applicable on a home loan. Fixed interest rates are those where you would pay a fixed rate of interest on home loan during the tenure of home loan. On the other hand, floating rate means, interest rates vary from time to time based on RBI interest rates. If you are going for short term home loan within 5 years, you can consider taking a fixed rate interest rates. However, beyond 5 years, you should always consider floating rate. Best way is to consider hybrid home loan (mix) where home loan interest would be fixed for the first few years and floating later on.
3) How much % of loan they offer: Another important factor is to check how much of total property value is being offered as a loan. Generally 70% to 85% of property value would be financed by banks or financial institutions. Considering highest loan % would help you to a) pay less down payment b) Get maximum loan and a maximum income tax exemption on this.
4) Consider loans of less processing charges and zero pre-payment charges: Most of the banks or financial institutions are not charging pre-payment charges in case you pay home loan in parts during your tenure. However, many of them charge processing charges ranging between 0.1% to 2% of home loan value. Highest percentage would kill your outflow while taking loan. Try checking wherever there are low processing charges home loans.
5) Prefer simple documentation and fast processing time: These days, many banks have simplified home loan documentation process. With a few simple documents, you would be able to get a home loan now. Also check the processing time. Go for early home loan processing provider.
6) Consider special schemes if possible: There are many banks or financial institutions like LICHFL, SBI etc. who are offering special home loan schemes for women and senior citizens. Considering them would help you to get better interest rates.
7) Consider Joint home loan if required: There are several positive factors for joint home loan a) If your income is less and wanted more loan and your spouse is working, you can consider taking a joint home loan. B) Such joint home loan helps you to get a good income tax exemption of Rs 2 Lakhs + Rs 2 Lakhs = Rs 4 Lakhs per annum as an interest exemption (assuming that both have equal proportion of rights).
Also Read: What documents are required for home loans in India?
8) Compare various home loan features: Do you know that if a simple table is given to you along with all major features, you would be able to pick-up right home loan scheme suitable to you. Here is the latest home loan interest rate comparison statement which would help you to choose the best home loan in India.
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How to choose the best suitable home loan for you
I have got more knowledge to this article. This is more helpful for me… Thanks
I like your article.
I have one doubt regarding home loan and investment as well.
I want to take home loan 50 lacs at the same time i have 15 lacs cash with me right now.
Where shall i invest for 15lacs cash? or is it better is it better to take 35lacs home loan?
I am really confused a lot between these two things.
I will settle the 50 lacs home loan tenure is 5 years.
Kindly advice on this issue.
You should always fund partial amount through your own sources and balance through bank. Taking full loan and investing your own sources in fd or mf’s may not be advisable.
Thank you sir for your kind reply. I am NRI so I will finish 50 lacs loan either 4 or 5 years. That’s why I asked 15 lacs investment of my own cash either real estate or mf or fd is good decision?
If I am in your place, I would take 15L as down payment / partial payment for my real estate investment.