Points to be Noted Before Applying for a Home Loan

Owning a residence is a significant financial decision for any borrower. However, purchasing a home requires substantial credit, which a housing loan can cover conveniently.

In this regard, first-time buyers need to make an informed decision evaluating the interest rate and repayment capability. Apart from these factors, individuals need to check a few things before making the home loan application.

Few pointers to keep in mind before initiating a home loan application

1. Credit score plays a crucial role

Whether you are a first-time housing loan applicant or a borrower with credit-availing history, lenders check credit score for evaluation. This score ascertains an individual's repayment capability and consistency of paying the outstanding dues. Typically applicants with a 750+ CIBIL score have a higher chance of home loan approval and enjoying reduced home loan interest rate.

2. Evaluate the EMI obligation

Applying for a home loan also obligates borrowers to monthly instalment outgo. One would need to assess whether he/she can bear the resultant EMIs. Individuals can use a home loan EMI calculator in this regard for a precise result.

3. Tenor

Additionally, applicants should also check the home loan tenor. This would help them in calculating their repayment structure. Going for a short tenor reduces the interest burden and outstanding balance. However, it increases the EMI burden. Applicants must also check the part-prepayment policy and foreclosure charges of the selected lender.

4. Assessing the documentation

Before making a home loan application, individuals must check the document requirement mentioned by lenders. Keeping these papers handy streamlines the application process and makes it hassle-free.

Some of the required documents are –

• KYC documents- This includes passport, PAN card, Aadhaar card, driving license, etc.

• Income proof- It includes salary slip or Form 16 for salaried applicants and profit & loss statement and TR papers for self-employed.

• Business vintage of not less than five years.

• Bank statements for the previous six months.

Apart from the mentioned documents, different lenders may have additional requirements like passport-sized photographs, property papers, etc. Hence, before making a home loan application, potential borrowers must evaluate the mentioned factors for swift processing.

Read More

Important Things to Consider Before Switching for Home Loan

Borrowers often look for different measures that can help them reduce their interest rates and make home loan repayment easier. A home loan balance transfer comes as a great aid for individuals who are unable to bear excessive monthly interest charges and hefty EMIs. This process entails transferring your existing home loan account from one financial institution to another to enjoy lower interest rates and better service terms. 

However, before getting into that process, apart from using a home loan balance transfer calculator to compute liabilities, borrowers should take certain things into consideration. For instance -

• Charges associated while making the transfer

Since your primary goal is to alleviate your financial burden, you need to make sure that your current lender is not going to impose additional charges when you are making the switch. While the existing financial institutions can impose fines and additional charges, the new ones can ask you to pay for processing fees, administration, and other costs. Therefore, before getting into that process, it is wise to determine the overall cost you’ll need to bear using a home loan balance transfer calculator.

• Check your credit score

While availing a new housing loan, a decent credit score helps you enjoy faster approval and moderate interest rates. Having a high credit score comes with multiple benefits, even in the case of a home loan balance transfer. Lenders will be checking how you have handled the previous loans, if you have a history of defaults, etc., before approving the process. 

• Check if the new lender is offering top up loan facility 

While making the switch, borrowers should also check whether the new lender is offering a top up loan facility. A top up loan entails an amount that is available over and above the existing loan principal. Even the tenor against this top up can be similar to your existing one, making it easier to handle the repayment. 

In order to utilise the home loan refinance benefits, it is advisable to check the market rates and gather ample information about the new lender beforehand.

Read More

Documents Required for Home Loan Refinancing

Individuals looking to avail a lower interest rate on their existing housing loan have the option of transferring the outstanding balance to a new lender. However, one needs to submit a few documents to initiate this home loan balance transfer process -

1. Consent letter 

An existing borrower needs to put in a written application to the current lender intimating about the balance transfer and issuance of consent letter for the same. 

2. No Objection Certificate

One has to obtain NOC from the present financial institution that indicates assent to transfer the outstanding loan amount to a new lender. 

3. Loan agreement

This agreement pertains to a sanction letter issued by the initial lender. 

4. Foreclosure letter

 It declares that the loan is foreclosed at a specific date without any outstanding balance. 

5. Post-dated cheques

To obtain a housing loan, borrowers have to submit post-dated cheques with the lender. These pending cheques are subsequently to be deposited with the new housing finance company. 

6. Property documents

Property documents are highly important for a home loan balance transfer. The entire set has to be submitted to the new financier.  

7. KYC documents

 The new financial institution would require these KYC documents –

• Identification proof 

• Aadhaar card 

• PAN card 

• Voter card 

• Driving license 

• Employment ID card issued by NREGA  

• Address proof

• Aadhaar card 

• Passport 

• Driving license 

• Voter ID 

8. Employment documents 

 These financial documents are essential for balance transfer –

• Latest salary slips 

• Previous six months' salary account statement 

• Form 16 from your present employer 

9. Property related documents 

For home loan transfer, the following set of documents are also required to verify the purchase of your property –

• No Objection Certificate from housing society or property developer 

• Property purchase documents 

• Registration certificate

• Stamp duty papers 

Depending on the new financial institution, further additional documents may have to be submitted for a home loan balance transfer, apart from your photograph and application form of the original lender. 

One should note that availing a top-up loan during balance transfer does not require borrowers to submit any additional documents.

Read Also: Important Things to Consider before Transferring Your Home Loan

Read More

These Factors are Going to Affect Your Home Loan Interest Rates

 Housing loan interest plays a crucial role in determining the cost of borrowing. Thus, it is imperative for borrowers to know the factors that may affect the home loan interest rates. 

Following are some of them. 

1. Loan amount 

Generally, lenders charge higher interest on borrowing a significant loan amount. Since the interest rates vary with lenders, borrowers need to compare financial institutions to get the best deal. Moreover, they can also opt for a substantial down payment to reduce their EMI component. 

2. Interest type 

Home loans generally come with three types of interest rates, fixed, floating and mixed. While the first two types are self-explanatory, a mixed option contains a fixed interest rate for a specific period, and the rest of the tenure accompanies floating interest rates. 

Typically, lenders levy higher interest rates on fixed and mixed interest rates. 

3. External benchmark of financial institutions 

From October 1, 2019, RBI mandated the financial institutions to link their floating interest rates with any external benchmark like repo rate, Treasury bill rates, and the like. Thus, the interest rate varies depending on this benchmark.

On top of that, lenders also decide their spread which is added to the interest rates. 

4. LTV ratio 

It refers to the percentage of value of a property that is extended to borrowers. RBI has specified that the LTV will be 90% for a loan amount of up to Rs.30 lakh, 80% for a loan amount of up to Rs.75 lakh and 75% for a loan value above Rs.75 lakh. 

Since the loan amount is determined based on this factor, the interest rate and EMI depend on it.

5. Credit score 

Since credit score shows a borrower's creditworthiness, lenders check for this parameter before sanctioning loans. For instance, individuals with a credit score of 750 and above are considered eligible to service a home loan.  

6. Job profile 

The income or type of employment of borrowers determines the interest rate of a home loan. For instance, lenders generally offer lower interest rates to salaried individuals. 

Thus, individuals can look out for these factors to get the best housing loan interest.

Read More

Will Shifting Home Loan to Repo Linked Loan Reduce EMI?

 The home loan is a unique funding option that lets you get the required amount to buy your own home. 

However, the home loan is a long-term commitment. And it demands adequate planning from borrowers so that the repayment happens easily. 

Before and after availing the home loan, borrowers resort to various ways to repay lower house loan EMI. They do that so that they are able to save enough to meet other monetary needs. 

By going for a longer tenure, maintaining a robust cibil score and going for the home loan balance transfer, they lower the EMIs. 

But many borrowers think if shifting their home loan to repo linked loan will reduce their housing loan EMIs or not. Read on and explore now!

If you have an ongoing home loan account, then you can get your housing loan linked to the repo rate. In this regard, the home loan interest rate may not reduce considerably. But the loan that is linked to the repo rate is considered more transparent in passing on the changes of the interest rate to the borrower. In earlier debts, the entire benefit of the lowering of the interest rate by the Reserve Bank of India (RBI) was not given to borrowers. And the portion of it was also pocketed by the financial institutes. If you want to go with this option, then you should enquire with your current lender only. This facility may be less cumbersome in terms of paperwork and logistics. You should ask your lender with a rate that they are offering to new applicants. Analyze it lower than your existing one and if it is the housing loan low interest rate in the end, then you should go for it. 

Overall, if you want to shift your home loan to repo linked loan, it may help you reduce your housing loan EMIs.   

Read More