A Few Home Loan Factors Every Borrower Should Know About

India witnessing a massive growth in the real estate market fuelled by a 17% to 19% increase of the number of home loans disbursed between 2017 and 2018. Today, affordable yet high-quality has become more affordable as the average household earning of middle and lower-income groups increases.

Similarly, the number of housing credit also grew by almost 16% in FY18, increasing the market penetration of mortgage loans to 10%. Availability of affordable loans and borrower-centric facilities like home loan balance transfer are enticing a large number of first-time and existing homeowners to purchase houses with credit instead of depleting their savings.

However, there are several factors that a borrower should know before applying for a home loan. Taking care of these things will allow you to make the maximum of the provided funds, and earn several benefits that lenders have to offer.

Let’ stake a look at a few home loan factors every borrower should know.

You can choose the type of interest rate on your loan while applying. Your choice of fixed or floating interest rate will depend on your risk appetite and financial requirements.

Fixed rates will keep the EMI amount consistent throughout the tenor as will be the rate of interest. It does not change with market fluctuations. It is feasible for individuals who want zero-risk and plan a long-term budget while staying insulated from market volatility.

Floating home loan interest rates depend on the increase or decrease of the MCLR. They are usually 1% to 2.5% cheaper than fixed interest rates, but riskier than its counterpart. The floating interest rate is ideal for people who want to earn maximum benefits while repaying the loan.

However, you should remember to check whether your lender has a “Force Majeure” clause if you opt for a fixed rate home loan. Under this clause, a financial institution can change the fixed rate of interest under certain circumstances, like a change in the MCLR, market condition, and repayment terms.

A balance transfer facility allows you to transfer the line of credit from your existing lender to a new one who offers a lower rate of interest. It is one of the most common and effective measures to decrease the EMI burden on an existing loan.

The new lender takes the remaining principal amount during a home loan balance transfer and charges the new rate of interest on it. Although you might have to pay certain charges such as processing fees, lawyer’s fees, mortgage charges, etc. the overall savings will accumulate to a significant amount by the end of loan tenor.

Another benefit of a balance transfer is the availability of a top-up loan. It can be beneficial if the cost of construction exceeds your primary estimates.

Your credit score is one of the most important parameters lenders check when you apply for an advance. A higher credit score will also increase your chances of enjoying a lower rate of interest. The minimum requirement to avail a home loan may vary between different lenders, so you should check the eligibility criteria before applying to avoid chances of rejection.

These are some of the lesser-known, but important criteria that you should remember while availing a home loan. Remember to use an online home loan EMI calculator before applying to determine the EMI amount and thus choose a tenor according to your convenience.