Home loan is not difficult to get in today’s scenario. It is necessary for the borrower to get information on current interest rate from different banks. It is a duty of the borrower to find eligibility for government and private banks. The smart borrower will take a loan which gives lowest rates and has part payment option as well. Take an overview of home loan
Which interest rate is more flexible and affordable?
There are two kinds of home loan interest rate
- Floating interest rate
- Fixed interest rate
EMI of the home loan is calculated either on fixed or floating rate of interest. Before taking any decision the borrower must go through both the patterns of interest rate. In the comparison of the other loans, the home loan is for the longest tenure. The borrower has to pay a huge amount of interest on the principal amount of home loan.
Fixed rate of interest
- Under fixed rate of interest, the percentage of interest is fixed for the entire tenure.
- Throughout the loan, the same percentage of interest is charged.
- Fixed rate of interest must opt by the borrower only when the rate of interest is bottom down.
Floating rate of interest
- With the change in market lending rates the floating rate of interest changed.
- According to the fluctuation in the market lending rates, the interest rates on the EMI might get increased or decreased.
- Under fixed floating rates the bank provides an alternative to increasing the tenure of the loan. There are different interest rates on a home loan provided by the bank.
When to take a home loan?
- Normally people take a home loan for 20 to 30 years as it is a long-term investment plan.
- Usually, rates on home loan keep fluctuating. As the home loan rates will change in 20 years, so it is important for the borrower do not take the home loan just on the basis of the interest rate.
What is the right time to take a home loan?
- If the price of the property will rise in future and you cannot afford to loose it.
- The EMI should not exceed your monthly income. It should be within the limit of your budget.
- In order to take home loan finding the property to purchase is the initial step should be taken by the borrower.
- Verification of the documents of the property will be done by the bank.
- Bank provide the maximum amount of home loan after considering your eligibility to repay the loan.
- Bank will consider other valuable factor related to the property.
Eligibility to repay the loan
- The borrower should fall under the Eligibility criteria for home loan. According to the value of the property and the monthly income of the borrower, the bank offers the loan.
- Bank and other financial institution provide the maximum amount of the loan within your budget.
Select Home Loan after evaluation
- During the process of the selection of home loan borrower must compare home loan interest rates of several banks with each other.
- The borrower must compare few things like
- Application fees
- Processing fees
- Legal charges
- Interest rates incurred by various banks.
The process to get a home loan
Apply for a Home loan
- Fill the application form of the bank from which you are taking the home loan.
- Provide the complete information about your financial status which includes your assets and liabilities to the lender.
- Provide your professional and personal details along with the property details and its cost.
Documentation and verification process
- The borrower will submit all necessary documents to the lender
- All the documents for home loan along with the application will be verified by the bank
Credit and default check
- Through repayment capacity, the bank will check the eligibility of the borrower’s loan.
- The bank will confirm the loan amount if satisfied by the borrower.
- The repayment capacity of the borrower will be checked through
- His salary
- The credit history of the borrower through CIBIL core.
Bank sanctions loan
- After all the verification the bank will decide the final amount and sanctions the loan.
- Bank will send an offer letter to the borrower which includes details like
- Rate of Interest
- Loan tenure
- Repayment options etc.
Acceptance of the copy
- After accepting the letter the borrower needs to send the copy of acceptance to the bank.
- Copy of acceptance shows that the borrower agrees to the terms and conditions mentioned in the offer letter.
Bank checks the legal document
- Bank will check the authenticity of the legal document of the property.
- Paper as a security against the loan amount will be kept by the bank.
- Valuation of the property by the bank determine the loan amount by the bank.
The signing of the agreement and the loan disbursal
- The borrower will first sign the loan agreement
- The bank disburses the loan amount.
Way to calculate the home loan eligibility
Getting a home loan depends upon the repayment capacity of the borrower. Bank consider various factor such as
- Income of the spouse
- Number of Dependants
- Credit score