The average age of buying a property has reduced and more millennials are buying their first homes. Millennials now make up 63 percent of homebuyers, up from 49 percent a year ago. Loan to Value (LTV) is the biggest determinant for millennial homebuyers while deciding a lender, a NoBroker Survey has said.
Other factors include home loan interest rates, job stability, flexibility of repayment options, and bank policies, it said.
Millennials prefer an LTV on the higher side as it enhances the overall ticket size of the purchase. Even if the loan tenure is for 15-20 or even 30 years, most people end up paying off much sooner than the tenure, it said.
As many as 1,200 homebuyers participated in the survey.
A home loan tenure of 10-15 years is the most preferred by 31 percent of respondents, followed by 24 percent respondents preferring a tenure of more than 10 years. About 65 percent of millennials are employed in the IT services sector while the rest are either self-employed or in government services, it said.
The loan tenure is driven by EMI-to-income ratio and interest payment on loan amount. Longer tenure means lower absolute EMIs for homebuyers. making it more affordable for millennials.
“The average age of buying a property has reduced and more and more millennials are buying their first homes. They prefer an LTV on the higher side as it enhances the overall ticket size of the purchase. This is the reason that higher LTV has emerged as the most important factor for millennials in terms of choosing the home loan providers, apart from interest rate," said Amit Agarwal, CEO and co-founder of NoBroker.com
NoBroker’s data also indicated that Q1 2021 sales have outperformed Q1 2020 sales. Bengaluru and Chennai have seen a jump of 41 percent and 47 percent respectively in sale transactions while Hyderabad has seen a jump of 52 percent.
Mumbai and Pune are leading the sales with 86 percent and 83 percent more transactions than Q1 2020. Delhi-NCR has seen an increase of 34 percent.
Low interest rates and digital practices in the loan application process by the lender banks are catalysing the trend along with attractive builder discounts and government initiatives, the survey said.
LTV and foreclosure charges are the most critical factors for deciding the lender bank for home loans, as per the survey. A higher LTV reduces the down payment amount and lowers (and in some cases nullifies) the foreclosure charges allowing homebuyers the freedom to repay and finish off the loans earlier than the loan tenure. Historically, most people end up repaying the loan amount within eight years, it said.
LTV refers to the ratio of loan amount and value of property. Higher the LTV, higher is the percentage of the loan. Millennials prefer this since it allows them to buy a house of their choice with comparatively modest savings.