If you are willing to fulfil your desire of buying your own home in India on a house loan, you should be aware that such a decision depends on the money you can afford.
Yes, hence, before you decide to avail a house loan from a bank or a non-banking finance company (NBFC), be sure to consider some points.
This is vital to do as getting best Home Loan in India involves lots of paperwork and documentation and can exhaust you. Let’s provide you some elements of a home loan that you should consider especially if it’s your first home loan.
An EMI amount is nothing but a fixed or a variable (depending upon the type of home loan interest rates you opt) amount of money which you need to pay to a lender. This amount reduces the principal, and you repay the house loan over a selected tenor. Thus, ensure that the home loan amount that you wish to avail carries an EMI which you can repay easily and without affecting your other monthly outflows. Generally, if you can keep a home loan EMI at 40-45% of your monthly income, it won’t haunt you. What’s more, if you get more money as you get appraisal each year, ensure to prepay some amount and reduce the principal, and EMIs as there is no penalty these days. You can also check your EMI affordability easily with a Home Loan EMI calculator available at a lender’s website free of cost.
Once you are aware of an EMI figure that you can afford for the house loan, contribute how much you can contribute from your pocket. Generally, you need to put a down payment of around 20-25% of the property value as no banks will give 100% loan. Another thing is some lenders may want some amount of the down payment in cash which is off records and maybe black. Thus, ensure to keep off from such lenders as they may also dupe you later.
The concept regarding a home loan tenor is simple to understand! The longer your home loan tenor is, the smaller will be your EMIs, but you will pay more interest rate. Also, the loan liability will be on your head for long and you may not fulfil your other financial goals. On the other hand, if you pay more EMIs if you opt for a short tenor, you will not only reduce the principal soon but even keep off paying more interest. Thus, if your income is higher, you should avail a small tenor and pay off the loan quickly.
House loans come with either fixed or floating interest rates. A fixed rate will help you pay only a fixed EMI per month while floating will depend on market conditions, and you may pay fluctuating EMIs. Thus, if your income is fixed and if you don’t want your monthly outflow to get disturbed, opt for a fixed interest rate.
Your Credit Score
Lenders see your Credit Score as the first thing while determining your home loan eligibility. Thus, ensure to consider checking your Credit Score before applying for a house loan so that you can get a lower home loan interest rate. You can also negotiate with your lender to offer a lower home loan interest rate if it does not offer you. How? It’s because your CIBIL Score is a powerful tool to negotiate for a lower rate.
The Bottom Line
Now that you are aware of the major house loan considerations that you need to make if you are willing to apply for a home loan, you can feel confident now. All the best for your home loan application!