It is not uncommon for people to opt for a home loan in India. Home loans are a long financial commitment, and people often spend more than a decade paying them back. Therefore, choosing a home loan provider should never be an impulsive decision.
People need to verify home loan interest rates before opting for it. But apart from that, people need to consider a few other factors to find the right home loan provider. The factors that can help you find the right home loan provider are as follows:
1. Loan Amount
The maximum loan amount provided to a borrower depends on the borrower’s income level and the value of the property. Typically, the loan amount granted is 70-75% of the property value. Some lenders also offer a loan amount of up to 80% of the property value.
Lenders assess the income level of the borrower because it shows repayment capacity. Your home loan provider will check your current cash inflow and liabilities. It will help determine how much EMI you can afford to pay every month.
A home loan provider might offer you a high loan amount, but it will also mean high interest rates. Don’t settle for home loan EMIs that require you to spend more than 40% of your net household income.
2. Prepayment Charges
Your home loan provider cannot add prepayment charges if you choose a floating interest rate. But if you opt for a fixed interest rate, your home loan provider can impose penalty charges for prepayment.
You can use your cash surpluses during your loan tenure for full or partial prepayment of your home loan. Before filling out your home loan application, find out if you have to bear prepayment charges.
3. Processing Charges
You have to bear certain charges when your loan application is being processed. Several charges are incurred when the lender assesses your property value and verifies all your details. According to your chosen lender, the processing charges can vary from 25% to 1%. You should always settle for a home loan provider who will charge a low processing fee. Try to negotiate about the processing charge as much as possible with the lender.
4. Interest-Only Home Loans
Some banks have recently started providing interest-only home loans which can be quite beneficial for a borrower. Here’s why you should consider taking an interest-only home loan:
- An interest-only home loan results in a low monthly outflow. You have to pay only the interest for the first few months (usually 36 months) which will be referred to as the interest-only period. After the interest-only period is over, you will have to pay the full EMI amount including the interest and the principal outstanding amount.
- With low monthly repayment costs for almost the first 36 months will help in increasing your cost savings. You can utilise your savings for various purposes such as home renovations or other personal needs.
- If you think you are paying a high interest rate during the interest only period, you can commence paying the EMI amount earlier. If you choose to begin your EMI earlier, you will have to start paying the interest as well as the principal amount.
5. Additional Facilities
You will develop a long relationship with your home loan provider as you will be spending more than a decade repaying it. Therefore, you need to learn about the additional facilities offered by your home loan provider. Some home loan providers will offer a step-up loan facility. It helps in boosting your eligibility for taking out a loan.
You also need to check out the customer service of the home loan provider. You might develop various queries during your loan tenure. The customer service of your home loan provider should clear all your queries and provide you with adequate information.
Final Thoughts
Choosing a home loan provider is more than looking for the best interest rates. Be mindful of the abovementioned factors to end up with the best home loan provider.
