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Planning to Take a Home Loan? Keep These Four Points in Mind

To achieve your dream of buying a home without burning a hole in your pocket, there are four important aspects that you should pay heed to.

March 30, 2022 / 11:56 AM IST

Home loans are a long-term financial commitment, and if you want to take one, we suggest familiarising yourself with certain key points. The repayment tenors available today range from 5 to 30 years, which means you could be paying off your loan for a substantial chunk of your life. Therefore, we advise that you learn all there is to know about a home loan through thorough research and prepare yourself for this commitment by stringently planning your personal finances. It will not only help you keep up with your repayment schedule but will also lend you an advantage in getting a low interest rate home loan, as you will be well-prepared to meet the lender’s eligibility criteria.

To achieve your dream of buying a home without burning a hole in your pocket, there are four important aspects that you should pay heed to. It will not only spare you unnecessary expenses but will help you save on your total cost of borrowing.

Four Things to Keep in Mind if You are Planning to Take a Home Loan

Here are the four things to keep in mind before filling out your home loan application to best maximise your chances of getting approved early.

    1. Percentage of Down Payment

    Lenders typically finance up to 70% to 90%* of a property's total cost as a loan, leaving the deficit to be funded by the borrower. The amount you put down while booking your house is called the down payment, and most home-buyers pay this on their own. The more you can shell out on your own, the lesser you have to borrow from the lender. The benefit of putting down a sizeable down payment is that it brings down your total cost of borrowing and the interest that will accrue.
    As a bonus, the lender is also likely to offer more attractive terms, when the applicant display that they are stable enough to put down a hefty down payment – it minimises the risk involvement of the lender and assures them of the applicant’s financial foresight and prudence.

    2. CIBIL Score
    Your CIBIL score carries considerable weight in determining the loan terms you stand to get. Individuals with a good credit score are deemed low-risk borrowers by lenders and are more likely to get lower interest rates and longer repayment tenors. Your CIBIL score summarises your credit health and history, repayment records and borrowing patterns – all points lenders factor in before they sanction a high loan sum at a low interest rate.
    Most lenders consider a score of 725 and above a good score and tailor their offerings accordingly. However, if your score ranks lower, you can stall your home loan application process and focus on improving your score first. Closing existing debt obligations, pending bills and payments, and clearing off unsecured loans will help your score bounce up. Another key cautionary habit that can help is employing routine checks on your credit report to avoid misses and discrepancies from the agency’s end.
    For applicants who need funds urgently, the last resort can be applying for a home loan with a co-applicant or a guarantor with a bankable credit score to get a loan sanction from their chosen lender.

    3. Personal Finance Planning
    A financial emergency can occur anytime, and you should be adequately prepared. If you take a home loan at the cost of your own personal finances without setting aside a sum of money to act as an emergency fund, it can severely impair both your repayment capacity and cash liquidity at the time of a crisis.

    4. Realistic Repayment Schedule
    An important exercise to carry out before applying for a home loan is putting a tentative repayment schedule in place that mimics your current financial standing and repayment capacity. Home loan EMIs are a lengthy financial commitment, and you must be sure of whether you can keep up with them before you apply for a home loan.
    If you are applying for a home loan, we recommend using a home loan EMI calculator to understand your EMI burden each month. This will help you ask for a loan amount that is in line with your repayment capacity and not overshoot your budget or compromise your financial goals. Lenders respond favourably to a pre-prepared repayment schedule as it speaks to your diligence, and your intent to clear off your loan without defaulting.

    Summing Up

    Thorough planning and preparing for a home loan may seem trivial, but it should be the first and the most crucial part of your home loan borrowing journey. To an extent, it can shield you from avoidable fund mismanagement and keep you on track through the repayment tenor. There are many free online tools at one’s disposal, such as Home Loan EMI Calculators which can help your research. Once you are confident about your repayment capacity, you can avail of the Bajaj Housing Finance Limited low interest rate home loans, starting from 6.65%* p.a.

    Coupled with this, the lender additionally offers borrowers the choice to link their home loan interest rates to the RBI Repo Rate – an industry-first initiative amongst HFCs that lets borrowers decide what external parameter will guide any increase or cuts in their home loan interest rates.

    Moneycontrol journalists were not involved in the creation of the article

first published: Mar 30, 2022 11:54 am