With the RBI cutting the repo rate to 4%, the home loan interest rate is at an all-time low, making this an opportune time to buy a home. Moreover, multiple lenders with lucrative home loan offers only make procuring the best home loan as per your financial standing easier. However, while a home loan is a smart financial device that helps you become a homeowner, it is also a huge financial responsibility for a long time. So, before applying for a home loan, judiciously research every aspect of this financial borrowing, including the home loan interest rate, the types of documents required for home loan application, and home loan eligibility criteria of your chosen lender.
Most importantly, you need to accurately calculate the exact home loan amount you require, keeping in mind your financial future and repayment capacity. Considering that home loan EMIs will be a sizeable part of your disposable income in the foreseeable future, here are some important things you need to factor in before applying for a home loan.
Choosing the right type of home loan interest rate
Choosing the right type of home loan interest rate does not end with opting for a lender who offers the lowest one, It’s a bit more complicated and involves choosing between fixed and floating interest rates. In a home loan with a fixed interest rate, the rate remains unchanged throughout the repayment tenor of the home loan, until the reset date. On the other hand, in a home loan with a floating interest rate, the rate fluctuates as per RBI rates and market conditions. Generally, a floating home loan interest rate is lower at the onset compared to a fixed rate, ensuring higher savings. It also gives you the benefit of making part-prepayments at no cost, which also helps you save money. However, it does involve paying more interest when the market dictates. So, make a choice with careful thought and consideration.
Comparing home loan offers from different lenders
Irrespective of the type of interest rate you choose, ensure that you compare loan offers from different lenders before settling on one. Shopping around for the right home loan at your convenience can help you save a lot on the overall cost of the loan. When you have a high credit score and meet all home loan eligibility criteria, you can negotiate for the best home loan interest rate with lenders and also get a loan amount that you desire. Further, comparing offers helps you understand the different benefits offered by different lenders, and choose the one that suits your needs. For instance, some lenders may offer property search services, while others may charge lower fees overall. Be sure to factor in everything that can impact your borrowing experience, from application to repayment.
Selecting the right repayment tenor
Ensure that you choose the right repayment tenor as per your financial capacity to have a pleasant borrowing experience. Longer repayment tenors mean lower EMIs, but most of your early EMI payment goes towards the interest on the loan, barely reducing your principal amount. On the other hand, a shorter repayment tenor increases your EMI outgo. However, it reduces the total cost of the loan as you pay less overall interest. While common sense dictates opting for shorter repayment tenors, the choice completely depends on your financial standing, future expenses and financial commitments. All said and done, ensure that you repay the loan as soon as possible by prepaying the loan or by increasing your EMI amount every year. Use the home loan EMI calculator to plan all this in advance.
Knowing your credit score
Before you apply for a home loan, ensure that you know your credit score. A credit score of 750 or higher increases your chances of procuring a home loan at a low interest rate. Furthermore, it makes you eligible for pre-approved offers from lenders, ensuring a hassle-free and favourable borrowing experience. So, if you have a low credit score, take necessary steps, such as clearing your dues and lowering credit card utilisation, to increase your credit score in the months leading up to the loan application.
Armed with this information, you can apply for a home loan with confidence. To further assure a transparent and comfortable borrowing experience, avail of the Bajaj Housing Finance Limited Home Loan. With this loan, you can access a high loan amount and enjoy features like an additional top-up loan, zero prepayment and foreclosure charges on simple home loan eligibility criteria and minimal requirement of documents. To enjoy all these features, all you need to do is apply now by filling an online application form.