The home loan is expressed as an equation would be –> Home loan = Cost price of the home – Down payment. The down payment can range between 10% – 25%, this could depend on your eligibility for a home loan and the cost of the property. The down payment may have to be paid from your existing savings, if you have set aside funds specifically for this need then you can conveniently make the down payment. If you have not planned for such a financial milestone earlier, then you may have to dip into funds that are earmarked for other key financial milestones. You need to make a prudent choice of what funds you may want to route towards the down payment.
By taking out a home loan, you will have an outgo in the form of equated monthly instalment (EMI), often for at least a decade. One should make an assessment using a housing loan EMI Calculator on the approximate EMI commitment. These housing loan EMI Calculators are available online, they are free to use. You may click here to assess your EMI using the Standard Chartered housing loan EMI Calculator.
Often, the builders may have tie-ups with banks to extend loans to their potential customers, in such cases, you can avail the home loan from these financial institutions as they may involve a shorter time for application approval and loan disbursement. You should also check your eligibility for pre-approved home loans. This could help to expedite the home loan application and disbursement process.
The EMI includes the principal and interest components. The interest component is determined based on the type you choose. There are primarily 2 types of interest rates – fixed and floating rates of interest. A fixed interest rate ensures that the rate of interest you pay towards your home loan remains constant for a predetermined period. The floating rate is where the interest rate fluctuates based on the interest rate cycle in the market. There are other variants such as hybrid interest rate home loans which are a combination of both these types of interest rates. The choice of type of interest rate should depend on the market interest rate. If the interest rate is high, then it makes sense to avail floating rate as the interest rate is likely to taper down in the future. On the contrary, if the market interest rate is at a low point, then it is prudent to lock it with a fixed interest rate home loan.
The next aspect which needs attention is the tenure of the home loan, as a thumb rule, you should try to pay off the entire home loan within the working years of your life. The tenure for home loans can range between 10-25 years, they may be extended to 30 years in some cases. You should realise that a 10-year commitment on a home loan would mean 120 (12X10) instalments. To illustrate the implications better, here is an example – If a person were to borrow Rs. 15 Lakh for 10 years at a 7.49% p.a interest rate, the EMI would amount to Rs. 17,797.4; this outgo is for 120 months. The same amount borrowed at the same interest rate for 15 years will amount to an outgo of Rs. 13, 896.7. Depending on your comfort level, you can commit to the appropriate EMI. You can choose the tenure that works best for you, check out the home loan offerings with Standard Chartered here.
A healthy credit score will ensure that you can avail of your home loan at competitive interest rates. Most financial institutions prefer a CIBIL score of 750 or higher. To maintain a healthy credit score, one should pay off credit card dues in full, on time. Any existing debt should be paid in time. These are means to build a healthy credit score. Check your eligibility for a home loan with Standard Chartered here.
Having the home loan documents in place will ensure that your loan application is cleared smoothly. Here is a list of home loan documents that you should keep handy while submitting your home loan application –
- Identity Proof / Passport photo
- Proof of residence
- Proof of Income / Bank account statements (last 3 months for salaried and 6 months for self-employed)
- Property documents including sale deed, occupancy certificate etc.,
By keeping these aspects in mind, you should be able to fulfil your dream of buying your abode. You can check out Standard Chartered’s home loan products and choose based on what suits you best.