A home loan is the long term credit that can be availed by the borrowers against the mortgage of the home purchased. Most of the banks finance home loans up to the maximum limit of 90%. The LTV of home loans varies based on the home loan amount and the credit history of the borrower.
Here is everything you need to know about home loans
- Tenure of home loan: A home loan can be availed for a maximum term of 30 years. However, some banks provide home loans for up to 35 years.
How to choose the tenure of home loan: An essential factor in deciding about the home loan tenure is the net disposable income. While the shorter home loan tenures mean you have to pay lesser interest, however, the Home Loan EMI of loans would be higher in such cases.
- Home Loan Interest Rate: There are two types of home loan interest- Fixed Home Loan Rates & Floating Home Loan Rates. However, most of the home loans are provided on floating rates, and also the lowest home loan starts at @6.95%
Getting lowest home loan interest rate: Borrowers must compare the home loan rates of various banks and non-banking financial institutions to get the lowest rate on home loans. Also, to increase your chances of getting best home loan rates, you must add a co-applicant to improve your home loan eligibility.
- Prepayment/Foreclosure Charges: As per RBI guidelines, there are no home loan prepayment charges both in the case of part payment and full foreclosure on floating rate loans sanctioned to individuals. Also, the loan should not be sanctioned in the name of corporate entities for availing nil charges on home loan prepayment. In the case of fixed-rate home loans, charges may vary from 1 % to up to 3% of the loan amount.
- CIBIL Score: CIBIL score is also one of the crucial factors that determine home loan eligibility. Banks generally consider a credit score of 650 or above to provide home loans.
Getting home loans on low CIBIL Score: If your credit score is down, you can consider adding a co-applicant who has a high CIBIL score to improve your chances of home loan approval. A women borrower has more advantages in terms of home loan offers. Thus, you can add a women borrower as a co-applicant.
- Income: Income is another determining factor based on which banks decide home loan rates. The minimum net salary to get a home loan is Rs. 25,000. In the case of salaried people, regular and timely credit of salary is also equally important. Further, your total experience in an organisation should be more than 3 years. The eligibility criteria for professional experience also varies for the bank to bank. Along with that, banks also consider the reputation of the organisation while providing home loans.
Here are terms related to a home loan that you must know:
CLSS Subsidy: Under PMAY scheme, borrowers can avail credit-linked subsidy scheme on home loan if the annual income is up to Rs. 18 Lakhs. The home loan rates and subsidy amount is based on the income of the borrower. However, this scheme is only valid for first time home loan borrowers who have previously not availed the benefit of any government scheme.
Home Loan Balance Transfer: If you think that the current home loan rates of another lender are less, you can switch your home loan to the potential lender, however, before doing that you must analyse the various costs involved in a home loan balance transfer.