Now that you have decided on your dream home that fits your
budget, it’s time to start thinking of the financial aspects, specifically
identifying the lender who will provide the loan for the purchase. Eligibility
criteria, interest rate, processing fee and other factors will are the key to
determine your lender.
Loan amount and
eligibility
The amount of loan you are expected to get depends on your
monthly income and the value of the property. Usually, the loan amount is 80-85%
of the property value. However, it could be more in some cases. The RBI,
through a notification last year, allowed a loan-to-value ratio (LTV) of up to
90% for home loans worth Rs 30 lakh or less. Whether you get a home loan at all
or not depends on your occupation, disposable income and number of dependents.
Interest rate
The rate of interest on the loan is one of the major factors
in determining the amount of loan to be taken. Research about interest rates on
offer and select the most competitive one. You also need to determine if the
rates are fixed or floating. While for short term loans fixed rates are better,
it makes more sense to opt for floating for long term loans.
Processing charges
and prepayment
The processing fee is the charge banks deduct for processing
the loan. This can range anywhere from 0.25%-2% of the loan amount. The lenders
will also set terms and conditions pertaining to prepayment. Like settlement
and foreclosing the outstanding amount, transferring the balance to another
lender's account, prepaying a part of or the full amount of the home loan, and
other things.
Responsiveness to
change in rates
The chances of getting a fair deal are higher with lenders
who cut their interest rates as per cut in the repo rate.
Turnaround time
The time taken to sanction and pay out home loan differs for
every bank. Make sure to select a lender with strong systems and great
after-sales service.
