Tips to Choose an ideal Home Loan Lender
When financing house purchase with a loan, multiple factors need to be considered. Nevertheless, starting it with budget and property selection is a fair way forward. After determining the budget and zeroing on a suitable residential property for purchase, the following step would ideally be to identify the best lender to avail a home loan.
Nevertheless, owing to the sheer number of financial institutions extending this credit option, arriving at the best financial institution can be challenging. Thus, one must keep specific considerations in mind while choosing an ideal housing loan provider. A cautious approach at the borrower’s end can further help avail and repay the advance conveniently.
5 Tips to decide on a suitable housing loan provider
- Consider the LTV extended by the lender
The loan amount will be directly linked to property value and income of the applicant. Usually, the sanctioned home loan amount is likely to be up to a maximum of 80%-85% of the value of a property, better known as LTV or loan to value ratio. With Specific lenders, the LTV could be even higher. For instance, if the valuation of the property ranges up to Rs.30 lakh, almost 90% of funding can be available as funding to the borrower.
However, the amount of home loan to be sanctioned is dependent on the borrower’s occupation, disposable income, down payment made, etc.
- Compare the rate and type of interest
Before applying for a loan, the interest rate offered by a lender must be considered. As this rate typically impacts the Equated Monthly Instalments (EMIs) and total interest outgo, considering the applicable rate is essential. An interest rate comparison among different lenders can offer a useful insight into the choice of lender.
It is thus one of the essential aspects one must consider before taking a home loan. Also, a borrower must consider whether the home loan interest rate applicable is charged on a floating or fixed basis. If the interest rate is fixed, there will be no fluctuation to the rate throughout the tenure. However, in the instance of a floating interest rate, it may vary as per prevalent trends in the market. It is also wise to use a home loan EMI calculator to know the impacts of different rates and their types on your repayment liability.
- Go through the applicable charges
Lenders establish terms and conditions concerning prepayment, which should be clarified to consider their impact on loan foreclosure, prepayment of a part, refinancing, etc. One must thus enquire about all charges applicable before deciding on the lender. Once done decoding the home loan fees and charges, you can make an informed borrowing decision accordingly.
- Check the lender’s responsiveness to rate change
A lender should also be chosen depending on how quickly and to what extent they are responsive to alterations in interest rates in consistency with RBI’s policy changes. For instance, it is advisable to choose a lender who has been prompt in adjusting the home loan interest rate as per RBI’s repo rate changes.
- Consider the time taken for loan approval and disbursal
The duration taken to approve, sanction and disburse the loan varies from lender to lender. Such a facility may impact a borrower’s decision to purchase a house, and hence, must be considered when opting for a lender. It is thus best to look out for a lender who offers prompt loan processing and fast approval as well as disbursal of the advance.
Some reputed financial institutions also provide their existing customers with pre-approved offers to simplify loan processing within minimum time. These offers are available on multiple credit options, including loans against property and home loans. Borrowers can check their pre-approved offer online only with their essential personal details.
Once you have selected the lender based on these parameters, availing a home loan would be typically simplified. However, make sure to check whether you fulfil all eligibility requirements and apply accordingly for improved chances of quick approval.
Reference links
https://www.dhfl.com/blog/how-to-choose-right-home-loan-in-india
https://www.financialexpress.com/industry/banking-finance/how-to-choose-the-best-home-loan/441634/
