The year 2021 is ripe for people planning to buy a home and applying for a home loan. We are saying this based on a market survey conducted by a leading property consultant in India.
Highlights of the Survey
JLL India conducted a home affordability survey at metro cities of India including Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Bengaluru, and Pune. They released their annual Home Purchase Affordability Index on 27th September 2021.
Affordability has gone up across the cities on the back of lower interest rates, stable housing prices, low base effect of the pandemic year 2020, and the Government’s initiatives.
if you are planning to buy a home in the metro, the time is perfect as per the survey
Kolkata tops the list in terms of affordability. Except for Hyderabad, all other cities in the survey have shown more or less stagnant property prices from 2013 to 2021.
The household income of metro residents has increased by 7 to 9 per cent in the last year.
This snapshot of the survey was about why we should buy or construct a home in a metro city. Now we will explain how we should plan an application for a home loan with a loan distributor or a bank.
Tips to follow when applying for a home loan in Metro cities in India
People in the metro apply for home loans for two reasons:
1) When they experience a fund shortage
2) When they do not want to liquidate savings
Whatever be the reason, you must follow tips for the best deal on a home loan and comfortable repayment.
Prime Lending Rate
RBI has announced home loans up to thirty-five lakhs for individuals under prime lending rate. It means banks and financial institutions provide cheaper interest rates for people applying for a home loan in metro cities.
Visit your lender or call them to know the rules and applicability of PLR in your city.
Research about Home Loan Options
We live in a digitally connected information-based society. You will find simply everything on the web. Use the online resources and research about a home loan. Focus on EMI options, Down Payment, and Repayment procedure.
A home loan is a long-term financial commitment. You should take sufficient time to search and learn all the relevant aspects of home loans such as RBI guidelines and impact on the interest rate, charges, taxes, etc.
After research about home loans, it’s time to plan affordability. EMIs are monthly addition to your existing expenses, so, you need to do financial planning about over-head cost, contingency funds for long-term up to thirty years.
Budget control is an extension of your financial planning. Once EMI is decided, you have clarity of overhead expenses on the monthly expenses. It is time to control your budget and reduces expenses wherever possible.
Prioritize your expenses, delay expensive work if possible, etc to adjust equated monthly statement. Delaying EMI is highly not advisable because it will impact your creditworthiness adversely. So, spend cautiously and include EMI in the monthly mandatory expenses.
EMI and Down Payment
Equated monthly statement depends upon down payment, lender’s discretion, borrower’s profile, etc. The general rule is your EMI should not exceed 40 per cent of the income.
Down payment varies as per the loan amount. A higher down payment lowers the loan amount, reduces EMI, and eventually shorten the loan period. If you do not have sufficient savings and capital, a lower down payment is advisable because the down payment is only one step towards a home loan application.
So, decide down payment wisely for convenient EMIs and loan tenure.
If you have a stable source of income, strict financial planning, and a knack for savings & investment, always go for shorter loan repayment tenure. A shorter repayment tenure with higher EMI offers a lower interest rate. You become the owner of the house faster with high EMI and saving on the interest rate.
Longer repayment tenure offers more EMIs of smaller amounts but a higher rate of interest. You pay a lot more in interest than the principal capital because of the longer repayment tenure. It is advisable to opt for longer repayment tenure only if your financial condition is not in good shape.
A credit score decides your eligibility for a home loan. Banks and financial institutions prefer a credit score above 700 for your home loan approval. Keep your financial transaction transparent, social profile professional, and avoid delay of credit card bills or any other loan for an acceptable credit score.
RBI has abolished foreclosure charges on home loans. Keep updated information and follow the Reserve Bank of India on Twitter. They post all the relevant information about loans, investments, etc., on their official Twitter handle.
Ask your lender about all the applicable charges such as processing fees, penalties and others.
Documents and Eligibility
Make a checklist of required documents and information for home loan applications. Documents such as address proof, ID proof, photographs, property documents, etc., should be updated and ready. Make a soft copy of all documents and save them in a folder on the desktop for a quick upload.
Eligibility criteria remain standard such as Indian citizens, correct documents, personal information, and so on.
Terms and Conditions
After covering all the points and steps, read the terms & conditions carefully. Highlight any point of confusion and ask your lender for clarification.
A home loan for your dream abode in the metro city needs proper research and understanding. Read the passage and refer to the tips to choose the best home loan for your needs. You should also check comparison websites for different home loans offered by lenders and loan distributors.