The coronavirus pandemic has severely affected almost every industry of the world, one being the real estate sector. In order to help revive the economy, RBI has kept the repo rate unchanged and financial institutions lowered the interest rates that were being charged on home loans. In fact, home loan interest rates have never been lower as certain lenders are offering home loan rates as low as 6.5%.
In this situation, what should be the ideal move for an individual planning to buy a house? Industry experts suggest this to be a good time to apply for home loan plans for property purchases. With the low rates, borrowers can afford home loans and comfortably repay their debt. However, please note that finding a good rate is only one aspect that makes for a good loan plan. There are various other factors that need to be kept in mind before going for a home loan. Here are 4 factors that borrowers should keep in mind while applying for home loans:
- Find a suitable repayment tenure
The first thing that a borrower should focus on while applying for a home loan is whether they can comfortably repay it. Lenders offer different loan tenures, and it is important to ensure that you have a suitable one. It is advisable to use a home loan EMI calculator, which will provide the EMI results of the home loan. Keep changing the loan tenure and amount to arrive at a convenient EMI figure, or look for a lender that provides a better home loan interest rate.
- Read the fine print of the loan document
This might seem like a basic instruction, but many borrowers have faced issues regarding their loan plans simply because of the fact that they have not read the fine print of their loan plans in detail. For instance, you might think that the only expense to incur is the EMIs of the loan. However, the lender might include additional charges such as processing fees or other service charges that would be mentioned in the legal document of the loan agreement. This is why it becomes so important to thoroughly go through the home loan’s fine print.
- Learn about the lender’s eligibility criteria
Each financial institution will function according to its own terms and conditions. Based on these terms, there might be differing home loan eligibility criteria for borrowers looking to buy property. Some common factors that affect home loan eligibility criteria are an applicant’s existing EMI obligations, monthly income, and spending power. These factors can affect the loan amount offered as well as the housing loan interest rate, which is why it is advisable to speak with the lender regarding their criteria.
- Be aware of the type of interest rate
While taking a home loan, you will have to choose between a fixed and floating interest rate. As the names indicate, a fixed rate is where the home loan rate remains constant irrespective of market fluctuations. A floating interest rate does fluctuate according to market conditions and is usually slightly lower than the fixed interest rate.
Now, the home loan interest rate is one of the most important aspects to think about while applying for a housing loan. However, please keep the other factors in mind to ensure that you have a good loan plan that suits your budget.