Home loan is really critical and important financial decision in our lives. Before you finalise your bank to secure home loan, try to get more information on current interest rates from different banks. First, gather some more information about how much each bank can give you. Find out eligibility for government and private banks. Which interest rate is more flexible and affordable such as fixed rates or floating rates? What is more easy a prepay option or balance transfer? We try to give answers to all such questions, and make this home loan process simple for you. To find the lender for 20 years term go through the fine print and save for years to come. A perfect Home loan is loan which gives you lowest rates throughout the tenure, has part payment options and allows you to balance transfer if you wish to.
with Lowest Rates ?
Should I take Home loan now or wait ?
The right time to take a Home loan is when:
- The Property you intend to buy is good and cannot be missed or it is expected that the price of property will rise.
- The EMI that you have to pay per month is above your monthly expense budgets etc.
Bonanza for home loan seekers as govt. offers interest subsidy for those earning 6 lakh – 18 lakh. The scheme has been envisaged for one year. Those who have been sanctioned housing loans and whose applications are under consideration since January 1 this year are also eligible for interest subsidy. Prime Minister Narendra Modi had earlier announced an interest subsidy of 4 per cent on housing loans of up to ₹9 lakh for those earning up to 12 lakh per year under PMAY SCHEME 2017. A subsidy of 3 per cent on housing loans of up to 12 lakh for those earning up to 18 lakh per year.
Major Home Loan providers in India
The first step involved in the process is to find your property, which is followed by the verification of property documents, post that the documents are examined. Simultaneously, you can start searching for the lender who can offer the best home loan deal after checking your eligibility criteria.
Know the Home Loan Eligibility: Banks offer the loan amount based on your monthly income and the value of the property. They will give you max amount in which your EMI of home loan and others loans is 50-60% of your income. Other factor is value of that property.
Applying for the Loan : After you have selected your lender, you have to fill in the application form, wherein the lender requires complete information about your financial assets liabilities; other personal professional details together with the property details its costs.
Documentation Verification Process: You are required to submit the necessary documents to the bank, which will be verified together with the details in the application
Bank sanctions Loan Offer letter to the borrower: After the credit appraisal of the borrower bank decides the final amount sanctions the loan, the bank further sends an offer letter to the borrower, which constitutes the details like rate of interest, loan tenure repayment options etc.
Bank checks the legal documents: The bank further asks the legal documents of property from the borrower to check its authenticity, so as to keep them as a security for the loan amount given. The next step involved is the valuation of the property by the bank which determines the loan amount sanctioned by the bank.
The borrower signs the loan agreement the bank disburses the loan amount.
Documents required in Home Loan
Generally, the documents required to process your loan application are almost similar across all the banks; however they may differ with various banks depending upon specific requirement etc. Following documents are required by financial institutions to process the loan application:
- Age Proof
- Address Proof
- Income Proof of the applicant & co-applicant
- Last 6 months bank A/C statement
- Passport size photograph of the applicant & co-applicant
How is my Home loan Eligibility Calculated
- Spouse s income
- No. of dependants
- Stability and continuity of occupation
- Savings history.
The most important concern of banks in determining your loan eligibility is that whether or not you are contentedly able to pay off the amount you borrow.
Fixed and floating rate of interest
When you avail a home loan EMI is calculated either on fixed rate of interest or according to the floating rate of interest. Before finalizing either, you must take a note of both the patterns and take a well-calculated decision. Generally, home loan is taken for a longer tenure compared to other loans such as personal loan or car loan. You borrow the loan for at least for10 years and maximum upto 30 years. In such scenario, you end up paying a huge amount as interest on your principal amount. Therefore, the difference of 0.5% can make huge impact on your overall interest amount. Let’s take a close look at both the patterns of interest.
Fixed rate of interest: Generally, in fixed rate of interest, the percentage of interest is fixed for whole tenure and same percentage of interest is charged throughout the loan. It makes the EMI payable at a constant sum throughout the tenure. Therefore, it is always recommended that you opt fixed rate of interest only when the rates are bottom down and if an upward trend is expected.
Floating rate of interest: Floating rates of interest changed with the market lending rates. Therefore, these rates are prone to fluctuations. The interest rate on your EMI might get increased or decreased depending upon the fluctuation in the market lending rates. In this case, bank provide an alternative to increase the tenure of the loan, at a constant EMI, for the borrowers who do not desire their EMI to be increased in case of higher interest rates.
How to calculate interest rate?
While applying for a home loan, the most important question is rate of interest. One more thing, which is equally important is how interest is calculated by respective bank. Banks are required to quote interest rates on a ‘reducing balance’ basis. Let’s take a look how this whole formula works:
For instance: You have taken a loan of Rs. 1 lakh for a period of one year at an interest rate of 10.00% per annum, on a monthly reducing balance basis. In this situation, you will pay 12 equated monthly instalment’s (EMIs), with a part of each EMI going towards repaying the principal amount borrowed (Rs 1 lakh), and the balance towards servicing the interest on your loan. What is important to note is reducing balance calculation is the interest component of your EMI keeps changing, from a high initial amount in the early part of your loan, to a nominal figures as the loan comes to an end.