The latest home loan market trends highlight a demand for
such financial products significantly. These factors include falling loan
interest rates, extended moratorium, and stagnant property prices, which have
contributed to the greater affordability of borrowers.
Considering these factors, a report claims that India’s
projected housing
loan market CAGR during 2021-26 to be
22%. All of these factors combined make this the best time to avail such
housing credit. If you are also planning to purchase your first home, here are
a few crucial factors to consider first.
Eligibility and
documentation
An applicant’s foremost concern should be cross-checking
his/her eligibility to see if it matches lender-specific criteria. Here are
some standard parameters that most lending institutions require applicants to
meet.
-
Applicants
must be resident Indian citizens.
-
They must
have stable employment.
-
Self-employed
individuals must own a business in profit for at least 5 years. Salaried
individuals must be employed with their current employer for minimum 3 years.
-
Age of
applicants must be between 23 and 70 years.
Besides, applicants need to submit ID proof, address
proof, income proof, financial documents, and all property-related documents required for home loan.
Interest rate and type
Financial institutions offer floating and fixed type
interest rates against a home loan. Floating rates are dependent on the current
market rates and vary accordingly. The RBI mandates financial institutions to
revise their floating housing loan rates every 3 months, which is when
borrowers can experience the effects of changed rates.
On the other hand, fixed rates remain unchanged throughout
the tenor, notwithstanding market rate fluctuations. Borrowers should look for lenders offering flexible transition
between the two. Additionally, compare financial institutions offering different
interest rates before picking the best.
Repayment tenor
Housing finance comes with substantially long repayment
tenor up to 30 years. Note that a longer loan tenor will facilitate substantial
funds and easier repayment, but it entails greater interest payment in the end.
To cut down on interest outgo, always opt for the shortest tenor possible,
depending on your home loan amount.
Credibility of lender
With loan scams on the rise, borrowers must verify the
legitimacy of their lending company before applying. They can do so by checking
if the creditor:
-
Is
registered with the state agencies.
-
Displays
active contact information like email address, phone number, and physical
address on their website.
-
Owns a
registered domain
-
Has positive
online reviews from customers
Opting for these measures before signing a home loan
agreement can help individuals save themselves from significant financial loss.
Additional charges and
foreclosure norms
Go through your lender’s terms and conditions to know in
detail about any hidden or additional costs. Standard charges include
administrative, processing, property appraisal, and documentation fees, among
others.
Tax benefits
Individuals must be aware of the tax exemptions they
can avail under the Income Tax Act to avail of greater savings with the lowest home loan interest rate. Section 24(b) and Section 80EEA offer tax deductions on
interest payment if house construction on borrowed funds is completed within 5
years up to Rs.2 lakh and Rs.1.5 lakh, respectively. Borrowers opting for the
old tax regime can also enjoy additional deductions on the principal amount
under section 80C.
Additionally, look out for other facilities available
before borrowing a home loan. Several lending institutions extend pre-approved
offers against such financial products to help individuals plan their home
purchase accordingly. Getting your housing loan pre-approved also facilitates
seamless loan disbursal. Also, make sure to understand your exact loan
requirement to avoid overburdening yourself with unnecessary debt and interest
payment.
