After one has identified their dream home within their budget, the next step is to find a lender who can provide a loan for buying it. This is not as easy as it sounds: there are a number of factors to be taken into account before zeroing on a lender. Also, many borrowers opt for banks they already have accounts with, which is not advisable. Another problem which borrowers often face is finding an authentic lender. The implication is that they opt for smaller operators who offer incentives which seem more convenient but are not trustworthy. Here are a few things one must know before taking a home loan in Ahmedabad, mentioned below:
Loan Amount and Eligibility: When one applies for a home loan, the eligibility of the borrower is checked. One can get a basic estimate of their loan eligibility by using home loan eligibility calculator tools, which are offered by various banks. The eligibility of the borrower is chiefly contingent upon the salary and repayment capacity. In addition to these factors, there are a few other factors which are also taken into consideration: age of the borrower, financial position, credit history and other liabilities and loans, among others. Usually, one can avail loan amounts up to 80-90% of the property value.
Going Interest Rates: Comparing the current home loan interest rates in the market before opting for a lender is also very important because it will determine the total interest that one will be paying and the EMI. It is also necessary to check if the rates are “fixed” or “floating”. Fixed interest rates remain fixed for the entire loan period; whereas, floating rates are contingent on market conditions. For short-term loans, it is better to go for fixed interest rates. For longer loans, opting for floating rates will be more viable.
Processing Charges and Loan Terms: Banks charge a fee for processing the loan. This charge is usually between 0.25-1% of the total loan amount. If possible, convince your lender into waiving this charge completely. This task becomes easier if you have been a long-standing customer of the bank. Lending banks also set conditions on prepayment, settlement, foreclosure, transferring the loan to other banks, etc.
Documentation: There are a number of documents required for home loan. While most of the documents are common to all the lenders, Documentation requirements vary from bank to bank. Documents frequently demanded include age, address and income proofs.
EMI Rates: EMI stands for “Equated Monthly Instalment”. It includes repayment of principal amount and interest outstanding amount. A lower EMI means lesser financial burden every month. Lower interest rates and repayment periods up to 30 years ensures a relaxed EMI for the period of the loan. One can calculate the monthly EMI using home loan calculators offered by various banks.
Avoid Third Party Agents: Many private banks enlist third-party agents. What must be remembered is that they are not employees of the bank and only work for a commission. It is advisable to negotiate directly with the bank officials. This has two benefits: It gives a better picture of the loan process and also prevents any chance of the agent misleading the borrower.
As far as home loans go, a “one-size-fits-all” approach is not viable. Each borrower has different needs, which can be fulfilled only by specific lender(s). While these tips can go a long way in making your task easier, it is also advised that you do some independent research on the various lenders and find the various services they offer.