How to Choose Best Home Loan Offer from Bank/ NBFC in India?
After finalising your dream home, it’s time to apply for housing finance. A Home Loan can be applied for purchase or construction of a new/ pre-owned property. You can apply for Home Loan through a Bank or NBFC in India, as per your requirement and eligibility.
Choosing the best Home Loan deal can help you save lakhs of rupees during the course of your loan. You can also apply for PMAY subsidy for your first residential unit besides saving taxes up to 2 lakh on repayment of Home Loan interest. To ease your Home Loan journey, MyMoneyMantra has compiled a step-by-step guide on how to choose the best Home Loan in India.
Step 1: Arrange for down payment. Know Loan-to-Value.
LTV is loan to value i.e. quantum of Home Loan that can be borrowed against the valuation of property. As a rule of thumb, the lender will not offer you 100% value of the property to be purchased. Based on its credit policy, the bank/ NBFC will finance 70 % to 90 % value of the home. The remaining amount is called down payment and needs to be paid upfront to buy the home. Thus it is important that you enquire about the permissible LTV and arrange for required downpayment amount before contacting a lender.
For instance if you Apply for SBI Home Loan, you will get loan up to 90% for less than Rs.20 Lakhs of property value and maximum of up to 80% for the property above Rs.20 Lakhs. Each bank has a predefined LTV standard and it can vary across the lenders.
Step 2: Know about eligibility factors
Apart from property value there are several other factors that determine eligibility for loan amount. Some of the factors for Home Loan that you should know about:
- Credit score- Your credit score acts as a measure of your credit worthiness or ability to repay loan. Higher the score, higher is eligibility for loan. Maintaining an adequate balance in your assets and loans and repaying credit in time, can ensure good credit rating for you.
- Repayment history- The history of repayment of your loans and Credit Card bills defines your attitude towards credit. The lender will access your repayment history to assess eligibility for Home Loan.
- Net income- The rate of interest or loan instalment is decided basis the NMI/ EMI ratio. Thus your net monthly income is one of the important aspects to assess your loan eligibility.
- Other loan accounts- Further, the lender will assess your current loans to evaluate your eligibility for loan amount. As Home Loan is a long term liability it is recommended to close other running loan accounts, if possible. This will not only make you eligible for more loan amount but will also improve your credit score.
- Co-borrowers- Adding a coborrower with good credit score and a monthly income, you can indeed boost up your loan eligibility. Any of your biological relatives, can become a co-borrower for a Home Loan. Besides, you must also know that women applicants are offered concessional Home Loan Interest Rate. Thus making female a primary applicant can help you avail of a lower rate of interest for Home Loan
Step 3: Assess the loan amount, tenure & EMI
After knowing the key factors that help lender evaluate your Home Loan application, it is important to understand how much loan amount, tenure & EMI you should opt for. One should never fall in trap for the maximum loan amount available to them rather they should carefully assess their requirement.
It is recommended to use Home Loan Calculator before availing of the loan. A calculator can also help you understand the size of EMI for different tenures.
Let’s understand how your HDFC Home Loan EMIs will vary according to loan tenure, interest rate & amount.
|Loan Amount||Tenure||Rate of Interest||EMI|
Rs 25 Lakh
6.90 % p.a
Rs 25 Lakh
6.90 % p.a
Rs 25 Lakh
6.90 % p.a
Step 4: Compare interest rate & other costs
Home Loan Interest rates can be fixed or floating. Some lenders also offer a switch option or combo of both regimes. The EMIs remain fixed through the tenure of the loan in case of Fixed Interest Home Loan, while for floating rate loans such as External Benchmark Linked Home Loans, EMIs will change as per the change in benchmarks such as repo rate or GOI’s treasury bills yields. So, you should choose the regime based on your financial health and repayment capacity.
Apart from interest rates there are other costs that you must know about. A lender will also charge processing fees, prepayment charges, penal charges, registration charges and stamp duty etc. Some of these charges are as per the local government body, while others are based on lender’s credit policy. Thus it is suggested to compare the cost of loan before choosing a lender.
Step 5: Use online comparison website & compare deals
After knowing about all these factors, you should avail of professional help from online loan comparison website like MyMoneyMantra and compare best available loan deals for your profile.
Apart from the above discussed aspects, the loan assistance will help you consider repayment ease and offer special deals according to your profile. For example- anyone who intends to repay loan according to the availability of cash flows should choose SBI MaxGain Home Loan or Flexi EMI option by Bajaj Finserv. The one who wants to repay EMIs steadily through the loan life, may prefer Axis Bank’s ‘Shubh Aarambh’ Home Loan and enjoy the EMI waiver. Thus a professional can help you find the perfect deal and also answer all your queries and help you lock the best deal.
Step 6: Keep documents handy
You will be required to provide your identity, address, job/ business & income proof along with property documents to avail of a Home Loan. It is suggested to keep the documents handy so that there is no delay in processing.
Here is the list of documents required for Home Loan:
- Identity Card issued by employer
- Duly filled loan application form with 3 passport sized photographs.
- Proof of Identity- PAN/ Passport/ Driving License/ Voter ID
- Proof of Residence- Recent utility bill or any other government issued document with address e.g. Passport/ Driving License/ Aadhar Card
- Property Papers:
- Construction permission (as applicable)
- Agreement for sale or allotment letter (according to local laws)
- Occupancy certificate (for ready-to-move property)
- Approved plan copy (Xerox blueprint)
- Development agreement of the builder
- Proof of payment to builder/seller
- Account Statement:
- Last 6 months’ statements for bank accounts
- Loan account statement (if any) for last 1 year
- Income proof
For Salaried Applicants:
- Salary Slips/ Certificates for last 3 months
- Copy of Form 16 for past 2 years
- Copy of IT Returns for last 2 FYs
For Non-Salaried Applicants/ Co-applicants/ Guarantor:
- Proof of business address
- IT Returns for last 3 years
- Balance Sheet & Profit & Loss A/c for last 3 years
- Business License
- TDS Certificate (Form 16A, if applicable)
- Qualification proof (for Doctors, Charted Accountants etc)
Step 7: Apply online
As you now know about all that entail in applying for a Home Loan, you should choose the right channel to reach out the lender. Opt for online Home Loan application process to tap multiple benefits such as in-person professional guidance, doorstep documentation pick up, free loan comparison, negotiation with lender, best interest rate & peace of mind.
Following these steps you will surely find one of the best Home Loan for your dream house.
To apply online for Home Loan, Personal Loan, Credit Card, Business Loan & LAP visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 100+ Banks and NBFCs. We have served 4 million+ happy customers since 1989.