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Home Loan

The past few years have witnessed a paradigm shift in the scenario for home loan seekers; nevertheless, consumers have been fortunate as property prices were steady and the interest rates at historic lows.

Undoubtedly, the picture has much changed now. Real estate in India is experiencing a boom, with property prices soaring higher. Moreover, there are no signs that this rise in underlying property prices will slow down anytime soon, consequently making it increasingly challenging for the first-time home buyer to acquire a home.

Although there has been immense progress in the financial status of various income groups, there exist several obstacles along the way to add to the woes of an interested home buyer.

Due to the increase in loan interest rates, it has been noticed that consumers have to part with a major portion of their increased income as down payment and later as EMI. This seems to be widespread among typical consumers in metropolitan cities; hence the dream for owning a home seems to be on the verge of turning into a mirage for a vast section of the middle class in India.

So what are the options left for a prospective home loan consumer?

  • If you are planning to purchase a home for the purpose of your own residence, then don’t make your search a wild goose chase by trying and wasting time in the market.
  • If your dream house seems way above your budget, you could consider a smaller property in the same area.
  • However, if you are planning to buy a house with the intention of selling it for quick profits, then do not be hasty; wait for the overheated property market to cool. Meanwhile, work out your budget and advantages before treating the property as an investment.
  • Five steps for choosing the right loan:

    The current housing loan market requires extensive research before opting for a loan. One should not get carried away by tricky advertisements. Rather than attempting to fathom terms like special interest rates for fixed tenure, hidden terms and conditions etc it may be best to opt for the bank that offers the lowest EMI (equated monthly installments).

    1. Gather data on interest rates
    It may be a wise proposition to get interest rate information from more than one source and compare the offers. A long term loan will mean lower EMIs but probably a higher interest rate and result in paying more for the house.

    2. Enquiry fees
    The processing fees, administration charges and the quantum of loan should be discussed properly. It may be prudent to have a written statement of all fees connected to the loan from the lending bank itself.

    3. Pre-approval letter
    Sometimes banks issue a pre-approval letter agreeing to finance a certain amount. This could result in the seller giving significant weightage to the deal. One may expect a modest price range and negotiate a better deal. This is more important if one is taking a bank loan for a commercial property.

    4. Negotiate loan
    Most lenders will bring down their charges for customers with a dependable reference, so do not hesitate to bargain. A bargain deal will easily fetch a home loan at around 0.25-0.5% lower than official rates.

    5. Avoid greedy lending
    Do not deal with a person who asks you to include fictitious data on your home loan application to get quick approval. Also, do not get pressured into borrowing additional amounts.

    Categories: Home Loans