Right Banks and Lenders for Home Loans

Lenders for Home Loans

Once the house you always desired is finalized, procurement of a loan is the next essential step. A well-defined process is followed to select the house and the developer.  The purchase is usually completed by a house loan. A smart choice of the right bank or lend for all made gives long-lasting peace of mind.

Let us check out the smart moves to select the right bank or lender for house loans.

1. CIBIL Score

This is also known as a Credit Score. A good credit score places you in a better negotiating position with the lender for interest rates. You may also be eligible for a pre-approved loan.

2. Rate of interest and allied charges

Rate of interest is the first and foremost factor in making the choice of the bank or lender as this defines the amount of monthly installment. However, allied charges towards house loans like processing fees, documentation, and legal fees cannot be ignored. Every bank levies a certain amount for these charges which include property valuation and assessment fees. This fee is calculated as per pre-defined basis points by the bank. The basis point is the common measuring unit for interest rates. One basis point is equal to 1% of the 1% of the interest rate. Alternatively, allied charges for banks range between 0.25%-2% of the total loan amount. Therefore, these allied charges are needed to be considered carefully along with the interest rates in finalizing the bank.

3. Incentives for high credit scorers

As mentioned above, a high credit score has its own advantages. If you have one then this can be your trump card. A high credit scorer stands on a centralized negotiating position addressing interest rates, allied charges, and foreclosure charges. In addition, a pre-approved loan can give you the much-required head start for the house purchase.

4. Proactive offering of reduced interest rates

It is important to check whether your bank or lender is proactive about offering the reduced interest rates from the RBI in loan repayment tenure. This is one of the important aspects in after-sales service as well.

5. Fixed and floating interest rates

This is yet another decision to be made very carefully. A decade ago, house loans interest rates were more than 9% but with the passing years, it has now come close to 6.5%. A few years ago, it would have been the right decision to choose the floating rate option. However, when the interest rates are already low then it is advisable to choose the fixed-rate option as the increase in the EMI amount is inevitable.

6. Credibility of the bank or lender

It is significant to research and ascertain how strong the position of the lender is before applying for your house loan. It is advisable to choose a nationalized bank or renowned private bank for loan procurement.

7. Tenure of loan

As per RBI guidelines, banks are only allowed to grant loans up to 80% of the agreement value. So gauging your repayment capacity, you can avail of a maximum house loan of 80% of the property value. It is important that considering your income, the house loans length has to be chosen. The longest tenure around 20 years is worth considering as the EMI amount is the least. When the longest tenure is chosen, with the passing years generally income increases and some lump sum payments can be done resulting in a reduction of the loan as well as its EMI.

8. Time of disbursement

The time of disbursement varies from lender to lender. On average, if all your documents are in place and with a good credit score it takes about a week. Otherwise, it may take more than 2 weeks.

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