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Saturday, September 24, 2022

Things to Consider before Applying for a Home Loan in India

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Since house construction involves significant financial investment, having the necessary funds beforehand is vital. With a home loan in India, individuals can easily meet their capital requirements for building their house. However, a home loan is a long-term financial obligation which borrowers generally repay over a longer period. They must take measures that can help them avoid any future complications and make their loan advantageous.

Factors to be careful of before taking a home loan in India

Following are some of the most important factors intending borrowers must consider before opting for a home loan application:

  • Estimating the required amount

Before individuals apply for a long-ticket home loan, they must have a clear idea about the budget for house construction. Otherwise, they may request insufficient/excessive credit. If their loan amount is inadequate, they may have to take another loan. In the opposite scenario, they will have to pay interest on the extra capital they borrow. 

  • Home loan interest rate

The interest rate directly influences the instalment amount. Individuals should try to get a credit facility from a financial institution that offers housing loans at a low-interest rate. This will help them pay off their monthly obligations without difficulty.

Before applying for the credit, they need to compare loan offers provided by different lenders. This way, they can choose the most profitable offer. However, besides the interest rate, several home loan charges also increase the borrowing cost. They also need to know all about these charges.

  • Loan-to-value ratio

A home loan in India generally comes with a loan-to-value (LTV) ratio of around 75%. This ratio indicates that the highest loan amount can be 75% of the total home construction expenses. In this scenario, borrowers need to pay the remaining 25% out of their pocket.

However, LTV ratio of housing finance is not the same for all the lenders in India. Individuals need to take this credit facility from a lender that allows higher LTV on home loan if they are unable to afford a large amount from their pocket.

  • Determine a suitable instalment amount

Individuals also need to understand how much EMI they can pay easily, considering their fixed income. This will help them determine a tenor for repaying their financial obligations. With a properly planned tenor, they can pay off dues easily. 

  • Home loan eligibility criteria

Lending institutions come with eligibility criteria which borrowers must meet to get the home loan application approved quickly without much hassle. With these loan eligibility requirements, lending institutions measure the creditworthiness of applicants. Individuals need to know these criteria before applying so that they can avoid the chances of rejection of loan application.

In this regard, intending borrowers also need to know various aspects that influence their home loan eligibility.

  • Pre-approved offers

Various reputed lending institutions in India give personalised pre-approved offers accepting which customers can get their credit amount instantly. They provide these special benefits in their financial products, including loans against property and home loans. Individuals can expedite their application process by leveraging these benefits. Borrowers only have to provide their names and contact details to check their pre-approved offers.

In conclusion, home loans in India can help individuals materialise their dream of owning a house. However, they engage in loan repayment for several years. That is why borrowers must consider the factors mentioned above. It will help them get the most suitable housing finance offer from the lending market in India. 

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