The environment in the Indian financial market today indicates affordability in household borrowing through low-interest loans and advances. It is thus conducive and has prompted individuals to direct their finances towards real estate purchases, especially residential house property. Given that home loans today are available at historic low-interest rates; it only helps with early initiatives towards house purchase and ownership.
Now, while these advances are available at low rates, one still needs to be well aware of the minimum and maximum range of these rates to find the lowest levy. It is also crucial to consider other factors contributing to your overall borrowing experience and loan affordability.
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8 crucial factors to know when availing a housing loan in India
1. LTV
When it comes to secured financing, LTV or Loan to Value Ratio is a concept applicable to all, including home loans. When assessing housing finance applications, lenders approve loans with LTV as the maximum financing threshold for the given property. In essence, it thus indicates the maximum financing available for an individual as a percentage of the available property’s current market value.
So, if you are planning to purchase a residential property with the market price of Rs.50 lakh and the LTV offered by your lender is 80%, the total financing available to you can go up to Rs.40 Lakh. The remaining Rs.10 lakh would need to be met as down payment. With reputed lenders, borrowers can avail an LTV of up to 95% on housing loans.
2. Maximum loan availability as per financial standing
The total loan amount available to you is also subject to your financial standing and repayment capacity. Based on your income and existing repayment liabilities, the lender decides whether or not to approve a certain loan value. You can use a home loan EMI calculator to better determine your loan affordability based on EMIs payable computed and choose a loan amount and tenor accordingly. Calculating your EMIs before availing a home loan can have several benefits in the long run.
3. Eligibility requirements
As housing loans are secured advances, their criteria for availability are simple too. You must check your lender’s home loan eligibility criteria before applying. The factors outlining these requirements include your –
- Occupation
- Age
- Monthly income
- Residential status
Depending on your financial profile, your lender may ask you to fulfil other requirements for loan availability.
4. PMAY benefits
With home loans, the availability benefits can span up to significant interest reduction under the PMAY or Pradhan Mantri Awas Yojana. Based on your PMAY eligibility and beneficiary selection, you can avail significantly low home loan interest rate for affordable repayment of the advance. It is best to know your PMAY eligibility beforehand to check if you can apply,
5. Tax benefits
In home loan repayments, both principal and interest components come with tax benefits to the borrower. Herein, the individual servicing the loan can avail principal and interest reduction annually up to Rs.2 lakh and Rs.1.5 lakh, respectively, under different sections of the Income Tax Act 1961. Both new and existing borrowers can avail home loan tax exemptions and benefits that reduce the overall loan liability.
6. Documentation
Paperwork for housing loans is simplified too, with document requirements reduced to minimal. You only need to provide your KYC documents, along with income documents to avail funding conveniently. The lender may ask you to submit additional documents based on your borrowing profile.
7. Interest rate levy
Housing loans inherently attract low rates of interest as they are secured funding options backed by residential property mortgages. You must, nevertheless, check and compare different levies in the market and decide on the most affordable loan option.
Along with low-interest rates, some best lenders levy other nominal fees and charges on home loans as well.
They also bring pre-approved offers to make financing quick and convenient for individuals availing funding. These offers are available on several financial products, including home loans and loans against property. Provide only your name and contact details to check your pre-approved offer.
8. Credit score and its importance
Even though home loans are secured advances, the credit score of an individual holds typical consideration and allows the lender to assess creditworthiness. Thus, it is best to check your credit score before applying and send your loan application only with a score above 750.
Also Read: 7 Aspects to Consider Before Applying for a Home Loan
Although a high-value advance with a tenor commitment spanning over decades, home loans are one of the most sought-after funding options. The right prep to avail funding for house purchase can help secure financing at the best rates along with favourable terms in advance. Make sure to keep your previous repayment liabilities updated with no delays whatsoever to gain lender trust in high-quantum borrowing for easy loan approval.
