Although anyone who is above 21 years of age and has a good CIBIL score can apply for a home loan, there are a few secrets to get the best loan at the best price.
1). Eligibility: To increase your home loan amount, you can take a joint loan with your spouse. The monthly income of you and your spouse is added and taken as one by the bank. This results in a higher loan amount sanctioned in your name.
2). Negotiate: Don’t leave any stone unturned. You are purchasing a house. Do all you can to get the best rate from the bank. Use your negotiation skills and get a better rate of interest. Try negotiating towards the end of the month. The sales personnel may just give in to achieve their sales targets for the month. This could be your best leverage.
3). Fixed or Floating: There are essentially two types of interest rates attached to a loan. A variable (floating) rate of interest will fluctuate depending on the market conditions. Fixed on the other hand will remain fixed irrespective of the market conditions. Ideally if the interest rates are predicted to go up in the future, go for a fixed interest rate for your loan. If the interest rate is predicted to fall, go for a variable interest loan. Statistics show variable interest rates to be better and the borrower ends up paying less.
4). Investments & Savings: In today’s costly world, expenditures are skyrocketing because of inflation. Try to save more and makea bigger down payment. This will reduce your loan amount and will lower your EMI. Calculate your home loan EMI using a EMI calculator beforehand to get a know-how of the situation. The banks will then categorize you as less risky and this will lower your rate of interest on the loan, benefitting you. Also try and invest some money in government bonds. This could help you offset your EMI interest on the home loan.
5). Duration: This, de facto is a very essential element in a home loan. The lesser the duration of the loan, the lesser you pay overall. Similarly the longer the duration of the loan, the more you pay overall. If you do the math, you will notice the above to be true. Try to stick to a shorter duration.
6). Check for hidden charges: The cheapest is not always the best. Many a times banks reduce the rate of interest on loans to make it look more attractive. Look for hidden charges that banks won’t disclose at the outset such as the processing fees, legal fees, administrative fees etc. We have spoken about these hidden costs in detail in our blog here. Speak to the banks you have shortlisted and find out all the costs before hand and add it up. Then go about selecting the best bank.
7). Other Liabilities: This is a crucial element that escapes an individuals mind. If you have other loans (ex: car loan), and you apply for a home loan, the net amount you will be entitled to will be less. The bank will deduct the EMI you have for your car from your monthly income and then decide the total amount you are eligible
for. Try reducing the other liabilities before taking a home loan. This will increase your chance of getting a greater sum.
8). Patience: This factor always pays off. Waiting for the right moment. Interest rates fluctuate with respect to the market. But there always comes a time when the interest rates are relatively low for a long period. Correctly predict such moments and take your loan then. It’s worth the wait now, isn’t it?
9). CIBIL Score: Do you know your CIBIL Score? If you have an account in the bank, you have a CIBIL score attached to your name. This score ranges from 350 to 900 depending on your ability to repay the loan amount on time. If you have a high score, usually above 750, you will get a loan without any issue. On the other hand if you have a low score you will not get a loan or even if you do, you will be charged a very high rate of interest because the bank categorizes you as risky. Pay your dues on time and improve your score.
10). EMI: Last but not the least; ask the bank to tell you the EMI you have to pay every month. See if you can manage the EMI along with your daily expenses. If you feel the EMI is eating a great proportion of your monthly income, increase the duration of the home loan and reduce the EMI by a margin. Again the longer the duration, the more you end up paying. Try making the least costly choice.
Once you have taken care of the above essentials, you will be more than ready to Invest in your dream home!