The next time you decide on buying your property and the amount of loan you require, this article should help. Most customers just think of the
interest rates while going for the home loan.
This is a prudent thing to do, however there are a multitude of other things which you should keep in mind as home loan is usually for a tenure of about 20 years. So these factors also mean a lot to your experience during the tenure of the loan.
For more information please reach out to our expert team at Nandanam Consultants
Different categories of home loan
Factors to consider for your home loan:
A good lender is one who clearly discloses all terms and conditions, is responsive to your requirements and gives you a loan at easy rates. A home loan demands constant servicing for next 15-20 years, and therefore, interest rate should not be the only base of choosing the lender.
Check credentials of the lender- It should be remembered, that the Reserve Bank of India (RBI) has no control over what the loan provider will charge. Each lender has its own cost of funds and they accordingly decide the charge whatever it deems fit. So, you should compare what a lender is charging as interest rate to new customer and on loans which are already running with them for past 2-3 years. This will help you decide what would happen to you two years down the line.
Negotiation- If you are earning good income and have a decent CIBIL score then you should try to negotiate for home loan rates from lender. You might get 0.25 to 0.75 percent rate lower than normal. It also involves doing negotiation for processing fee. Many lenders are charging 0.5 per cent- 1 per cent as upfront fee but if you will do negotiation then it can be lowered to 0.1 per cent.
Stick to one lender- Never make a mistake of applying to 5-6 banks at a time as after the introduction of CIBIL, each new loan enquiry can lower your credit score by approximately 10 basis points. A low credit score can impair your power to demand an easy rate. So, you do your research or talk to our experts before discussing the final deal.
Fixed or variable interest rate?- Interest rate varies from time to time and it is a good idea to do a proper analyzing of liability portfolio on the regular basis in order to get maximum benefit out of it. It means, if you are borrowing for a short period, i.e., for 2-5 years, then you should go for fixed rate, or else, you can choose the variable interest rate, in the hope that the interest rate will come down in the longer tenure.
Right selection- Since loan is for the long-term, therefore, you should select that company which is offering other loan products also, like, personal loan, car loan, education loan, etc. If required, you will be able to get preferential interest rates on other products also on the basis of your track record with the lender.
This will also avoid running from one lender to other for your varied financing requirements.
This is a prudent thing to do, however there are a multitude of other things which you should keep in mind as home loan is usually for a tenure of about 20 years. So these factors also mean a lot to your experience during the tenure of the loan.
For more information please reach out to our expert team at Nandanam Consultants
Different categories of home loan
- Home purchase loan: It is one of the basic types of housing loan which is taken for buying the new house.
- Bridge loan: Such kind of housing loan helps in financing the new home of the borrower when he is interested in selling the current house. It is mainly a short term loan which is given to the applicant for the period when he is interested in selling the old house and wants to buy the new house.
- Home extension loan: It can be used for extending or expanding the current home, like, adding an extra room or bathroom, etc.
- Home improvement loan: Such kind of loan is for doing renovation or repairing of the house which you have already purchased.
- Home conversion loan: It is the loan wherein the borrower has already taken a home loan for financing his current house but is now interested in moving to some other home.
With the help of the home conversion loan, borrower can transfer the current loan to the new house which needs extra funds. With the help of the new loan, you can make the payment of the earlier loan & arrange sufficient funds for buying the new house.
Factors to consider for your home loan:
- Interest Rate
- Pre payment charges
- Balance Transfer Charges(incase of refinance)
- Part-payment Charges
- Switching Charges (Fixed to Floating or vice-a-versa)
- Loan to Value ratio
- Speed of Sanction
- Ease of documentation
- Simplified credit and legal documentation
- Customer Service
- Franking Charges
A good lender is one who clearly discloses all terms and conditions, is responsive to your requirements and gives you a loan at easy rates. A home loan demands constant servicing for next 15-20 years, and therefore, interest rate should not be the only base of choosing the lender.
Check credentials of the lender- It should be remembered, that the Reserve Bank of India (RBI) has no control over what the loan provider will charge. Each lender has its own cost of funds and they accordingly decide the charge whatever it deems fit. So, you should compare what a lender is charging as interest rate to new customer and on loans which are already running with them for past 2-3 years. This will help you decide what would happen to you two years down the line.
Negotiation- If you are earning good income and have a decent CIBIL score then you should try to negotiate for home loan rates from lender. You might get 0.25 to 0.75 percent rate lower than normal. It also involves doing negotiation for processing fee. Many lenders are charging 0.5 per cent- 1 per cent as upfront fee but if you will do negotiation then it can be lowered to 0.1 per cent.
Stick to one lender- Never make a mistake of applying to 5-6 banks at a time as after the introduction of CIBIL, each new loan enquiry can lower your credit score by approximately 10 basis points. A low credit score can impair your power to demand an easy rate. So, you do your research or talk to our experts before discussing the final deal.
Fixed or variable interest rate?- Interest rate varies from time to time and it is a good idea to do a proper analyzing of liability portfolio on the regular basis in order to get maximum benefit out of it. It means, if you are borrowing for a short period, i.e., for 2-5 years, then you should go for fixed rate, or else, you can choose the variable interest rate, in the hope that the interest rate will come down in the longer tenure.
Right selection- Since loan is for the long-term, therefore, you should select that company which is offering other loan products also, like, personal loan, car loan, education loan, etc. If required, you will be able to get preferential interest rates on other products also on the basis of your track record with the lender.
This will also avoid running from one lender to other for your varied financing requirements.
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