Top tips to find the right home loan

Not every home loan is created equal. Finding the one that works for you will take planning and calculation.

Owning a home is the topmost priority for most people today, especially those who live in rental accommodation in the country’s expensive cities. Every person wants a space to call his own, free from the hassle of paying monthly rent and moving homes every few years. Hence, it is preferable to buy one’s own home and live in peace and security for the rest of one’s life.

However, you will need a home loan to pay the bulk of the home’s price. This is how you select the best home loan product for you.

• Check your loan eligibility. Each lending institution starts by finding out the applicant’s loan eligibility. This is computed by examining the applicant’s source of income, whether repayment capability is bolstered by spouse applying as co-owner, credit history, existing debts, etc. If the applicant is found suitable, the lender will give the go-ahead for the application. You can find out how much loan amount you will get and your monthly outgo.
• The EMI question. The monthly EMI you will pay against your home loan repayment is an important figure. It is deducted directly from your bank account every month and you cannot ask the lender to not deduct the EMI for a month or two if your finances are tight! Hence, agree to pay an EMI which will not strain your monthly budget to impossible levels. Ask the lender for all calculations of your EMI basis the different rates of interest being offered, or readjust the tenure.
• Choose the right rate of interest. You will be offered a fixed or a floating rate of interest on your home loan amount. If you are fairly confident of repaying the loan early, choose a floating rate of interest because your repayment amount will be lower. Else, choose a fixed rate of interest. The lender must give you a choice to select between the two and switch at a later date.
• Select a shorter tenure. If you multiply the EMI to be paid with the tenure (in months) that the lender is offering you, the resulting figure should be the loan amount. If you choose a shorter tenure, your EMI amount will increase. But the loan with a shorter tenure will be cheaper for you. However, select a shorter tenure only if are sure of repaying the loan before tenure is up.
• Select the right lender. There are several home loan lenders today providing excellent loan products. Find the one that works for you the best by seeing the disbursal process, the rate of interest, the processing charges and whether any foreclosure charges are being levied. You can also try and negotiate the interest rate if you have a relationship with the lending institution.