Several banks are now offering aggressive home loan products, such as EMI waivers and interest rate discounts, with the aim of converting fence-sitters into home buyers. Among the various types of home loans, fixed and floating rate interest home loans, are the two basic types that you must be aware of. Banks also offer semi-fixed loans that have a fixed interest rate option for a certain portion of the loan tenure and for the remainder of the tenure, it converts into a floating rate loan.
Under a floating rate loan scheme, buyers get the option to consider three months, six months or one-year MCLR rates, depending on bank’s scheme. The interest rates are reset, according to selected MCLR rates. Banks also offer home loans with overdraft facility, wherein you can use the loan account as an overdraft facility, to pay interest only on the amount utilised from such an account.
Points to consider, while looking for the best home loan product:
- Flexibility in switching from floating to fixed rate and vice-versa.
- Tenure of the loan and whether it is as per applicant’s requirement.
- No prepayment penalty.
- Minimum loan associated charges and zero processing fees.
- Quick processing time.
See also: Calculate your perfect home loan amount
Things to keep in mind before applying for a home loan
Shubika Bilkha, business head at the Real Estate Management Institute, suggests some important factors points to keep in mind, before applying for a home on loan:
- “Maintain a good credit score, by repaying all existing loans on time.
- Maintaining enough money in the bank account and a stable income stream, for getting a loan easily.
- Loans taken towards or after retirement or those taken very early on in your career, take longer to process than loans taken between the ages of 30-50 years. So, buy your home at an early age.”
The credit score of an individual can reveal the repayment capacity of the borrower and is used by financial institutions, to understand if the borrower can be lent the amount requested.
Evaluating a home loan agreement
“A home loan agreement is the framework that controls your home loan. Before availing of a home loan, ensure that you go through the details of the agreement. If needed, seek clarifications from your lender or seek professional assistance,” advises Ramratthinam S, CEO, Muthoot Homefin (India) Limited.
Dos and don’ts for servicing a home loan:
- Provide all credit-related information upfront and on a transparent basis.
- Ensure that the EMIs can be serviced comfortably on a monthly basis.
- Set up a regular payment mode to ensure repayment on the scheduled due date.
- Keep reviewing the repayment of loans on a periodic basis.
Often, builders enter into tie-ups with banks, for supporting their customers to get loans easily. You should contact such banks/institutions and check if you can save money through lower interest rates, or by paying lower loan-associated charges. Usually, such banks offer quick due diligence and low interest rates, for pre-approved projects. For special offer home loans, read the fine print on the loan agreement thoroughly and evaluate the loan with normal loan products.