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Here are the Top 5 points to keep in mind before opting for a home loan

Biggest Investment for buying a dream house
Biggest Investment for buying a dream house

Here are the Top 5 points to keep in mind before opting for a home loan

Consider these pointers before you make the biggest investment in your life!

Buying a house is one of the biggest and most important financial decisions that you will make. Often, this financial investment may require financial assistance, taking a home loan is a long-term commitment. There are certain aspects that you need to keep in mind before you embark on this long-term commitment that will fulfil your dream of living in your abode.

Top 5 aspects to keep in mind when applying for a Home Loan

Down payment on your home

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.

Assess your EMI ability

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.

Choose the right type of interest rate

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.

Tenure of 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.

CIBIL Score

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.

Home loan documents

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

  1. Identity Proof / Passport photo
  2. Proof of residence
  3. Proof of Income / Bank account statements (last 3 months for salaried and 6 months for self-employed)
  4. 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.

Disclaimer

The views expressed in the article are those of Standard Chartered Bank (“SCB”) and do not constitute financial, professional or other advice. SCB, including its Directors, Officers or Employees shall not in any event be liable for any damages or injury arising merely from your reliance on any information provided here. Each bank / financial institution will have its own processes/ fees/ charges and any information contained in this Article is only indicative. Before placing any reliance on any information contained or views expressed in this Article, we would request you take all steps necessary to verify the correctness thereof. The information contained in this Article is only indicative. Each Standard Chartered Bank Product has its own terms & conditions and should be referred to in entirety. We request you to kindly visit “sc.com/in” or visit your nearest Standard Chartered Bank Branch or call on our Customer Care numbers for more details.