5 Essential Tips to Help You Score the Best Home Loan Deal

What defines a home? The response to this question depends on the respondent. To some, it is, in the purest sense, a living quarter to others, it is an emotional home, self-identification, or an investment. Or may even be used as security to some people out there. Regardless of how you perceive it, one thing is clear: “a home is a basic need”, and it is a revered commodity many of us work hard to have.

It costs a lot to buy or build a home. And one of the most popular ways is to get it financed via a home loan. Not only can it secure your savings, but it also gives you the flexibility to pay the debt little by little over a long period. In addition, with a home loan, you can save a huge amount of money that would otherwise go as tax.

Now, there are countless home loans available out there. And choosing the one that serves you the best is quite confusing and overwhelming. We are here to help you navigate this maze and shortlist the best home loan plan with five powerful tips.

The Higher your CIBIL Score, The Better Your Chances

• Home loans involve huge amounts of money. Banks need the surety they are lending to the right person – one with a good credit history.

• The Credit history is quantified as CIBIL Score. The higher your CIBIL Score, the more trustworthy you are to return the money, and the more loan amount you are worthy of getting.

• A CIBIL score of 750 or above is excellent but you are good to go even if you lie between 650-750. If it’s lower, try to improve the score before applying for a home loan. Banks might even lower your interest rate if you have a CIBIL Score high enough. So, having a higher CIBIL Score is a great advantage.

Savings: The Higher, The Better

• The more your savings, the more you can dedicate to the down payment amount. In other words, the more down payment you can make, it will lower your EMI and easier for you to repay the loan. But what is the down payment to begin with?

The Concept of a Down Payment

• The Down Payment is the money you pay the bank upfront (in advance). Depending on your loan amount, the down payment amount can vary between 10%-30% of the debt (or home loan).

• Your family, liabilities, and responsibilities increase with age, and so will your monthly expenses.

• It can even skyrocket for some. Lower EMI gives you breathing space to repay the loan at a lower interest rate staggered over a longer duration. And having good savings can help you lower your EMI and liabilities.

Simplify Home Loan EMI Calculation

• How much EMI you can get depends on three factors: your monthly savings, loan tenure (vary from 15-20 years), and rate of interest (the less, the better).

• Keeping the last two options constant, go for the bank that gives you a higher loan for the given salary or monthly income.

• Every bank gives you the option to calculate your EMI – offline as well as online. The thumb rule is that half of your monthly salary is considered your monthly savings, and the more you save, the more loans you deserve. As per the present trend, you can avail of a home loan of up to 25 lakh rupees for a monthly salary of 40 thousand.

• Knowing how much EMI you have to pay gives you a good idea of whether a property is affordable or out of your range.

Compare Home Loan Offers Across Banks

• Just like different banks give you different loan amounts for the same salary or income, similarly, they vary in terms of how much money the debtor (you, that is) will end up ultimately paying.

• Ideally, a bank with a low interest rate on a home loan will make you pay less and thus should be preferred. Other things include home loan processing fees, application fees, technical valuation charges, and other expenses you must consider before finalizing a particular bank for a home loan.

• Besides, we’d suggest you go for the maximum loan tenure, which is 30 years, and keep your EMI manageable. Overall, go for a bank that provides the best value and, thus, peace of mind.

Make Sure Your Documents Are Ready

The bank will request certain documents to process your home loan application successfully. The list of documents required is subject to which bank it is and your type of employment – whether you are salaried or self-employed.

These documents include your recent salary slips, ITRs, bank account statements, etc. And it pays to be ready with them in advance to avoid rush and hassle at the eleventh hour. You can easily get a list of required documents for a home loan by visiting the bank's website or calling them.

Happy Home Loan Hunting – Best Wishes from Wealth Clinic!