When it comes to Home Loans, a penny saved is a penny earned. Competition amongst Home Loan lenders is also a good thing because it makes it easier for the customer to get the best deal on their Home Loan.Whether you are planning on getting a new Home Loan or have had a Home Loan for a while, here are 7 important criteria’s you can use to compare which Home Loan lender is giving you the best deal.
1) Home Loans: Loan to Value Ratio in India
Whenever you purchase a property, you have to give a down payment amount and the remaining amount is paid by your Home Loan lender. RBI allows banks and financial institutions to finance a maximum of 90% of the property value. Some lenders like HDFC Home Loans finance 90% of the property value if the Home Loan amount is less than or equal to INR 30 Lacs. As the property value increases, HDFC Home Loans can be obtained for 75% of the property value if the property value is above INR 75 Lacs.
2) Home Loan Interest Rates
Home Loan interest rates can be fixed as well as variable.When you think of comparing Home Loans, the first thing that comes to mind is Home Loaninterest rates. This is an important factor as a small difference in the percentage of Home Loan interest rates can save you quite an amount in the long run.For illustrative purposes, if you take an HDFC Home Loan for INR 25,00,000 at a fixed 8% interest rate for a tenure of 15 years, using the HDFC Home Loan EMI Calculator, you will see that your monthly EMI is INR 23,981.If the home loan interest rate is increased to 8.5%, keeping the tenure and principal loan amount the same, you will see that your monthly EMI has increased to INR, 24,618.The difference amount per year is INR 7,644. Over 15 years, you will be paying an additional amount of INR 1,14,660 for your Home Loan.
3) Home Loan Processing Charges
Home Loan processing charges are payable only once when you apply for a Home Loan. Processing fees charged depends on your profile i.e. for salaried cases a fixed processing fee is charged whereas in case of Self employed cases the processing Fees charged can be in the range of 0.5% to 1% of the loan amount. In self employed professionals cases the Processing fees can be as low as PF charged to employed class.You have to careful while selecting banks or financial institutions based on processing as some might charge you lesser amount initially but may charge separately for different services such as Legal Fee, Technical Fee etc. whereas some banks or financial institutions may charge you higher processing fee initial but it may be all inclusive. Hence you have to take into consideration the total loan origination cost while taking the decision.
4) Part-Payment and Foreclosure Charges on Home Loan Early Closures
No foreclosure charges or prepayment charges are applicable for home loans on floating rate of interest. Foreclosure charges might be charged on loans obtained under special schemes or non individual loans.
5) Property Insurance Charges
It is always necessary to protect your Home Loan against the unforeseen events in borrower’s life. Premium charged for such kind of Insurance policies are also funded by Banks/NBFCs. Please ensure that the policy selected is as per your requirements and also there is transparency in the dealing.
6) Services Available
During the tenure of your Home Loan you may need different kind of services for example you may need the interest payment certificate for claiming Income Tax benefit or you may need to make prepayment of your loan or you may have to make enquiries about your loan. Please ensure that the banks or financial institutions you are choosing offer these services at a click of a button. Also ensure that the banks or financial institutions you are choosing have wide network of branches so that you can deal with ease with any of the branch. Some banks may offer you one time services but may lack online facility or may not able to provide branch network. Please avoid such banks or financial institutions.
7) Home Loan Top-Up Amount
Home Loan providers offer different Top-Ups based on their terms and conditions. If you feel you might need a Top-Up on your Home Loan in the future, it becomes important for you to know which Home Loan lender is offering you a higher Top-Up amount and at what interest rate.Home Loans are a long-term commitment. Good research puts you in a better position to negotiate the best Home Loan deal for yourself.
If I realize my home loan is not very competitive in the middle of it’s tenure, is there anything I can do about it anymore? I have heard about the term ‘home loan balance transfer’, can you confirm if that’s applicable here?
“Home Loan Balance Transfer” means transfer of a Home loan from existing financial Institution (FI) to another, for better terms. The reason for transfer may be the Rate of Interest or service, etc. At any point of time, if the borrower is not happy with the service or if he/she is getting better terms then definitely he/she can transfer the loan to another FI, however while doing so one has to undertake the overall cost benefit analysis so that the deal is beneficial for the borrower (as there are certain cost involved with transfer of loan). Also borrower can avail the Top Up Loan along with the Balance Transfer.
If I realize my home loan is not very competitive in the middle of it’s tenure, is there anything I can do about it anymore? I have heard about the term ‘home loan balance transfer’, can you confirm if that’s applicable here?
“Home Loan Balance Transfer” means transfer of a Home loan from existing financial Institution (FI) to another, for better terms. The reason for transfer may be the Rate of Interest or service, etc. At any point of time, if the borrower is not happy with the service or if he/she is getting better terms then definitely he/she can transfer the loan to another FI, however while doing so one has to undertake the overall cost benefit analysis so that the deal is beneficial for the borrower (as there are certain cost involved with transfer of loan). Also borrower can avail the Top Up Loan along with the Balance Transfer.