Is Interest Rate Everything in Home Loans?

It is true that home loan rate of interest is an important consideration for most borrowers. But financial smartness also means considering various other things. Applying for a Home loan only based on the rate of interest rate can sometimes become a big mistake for the borrower.

Home loan is a long-term commitment that involves a big amount of money. So, you must look at other details before signing the documents. What are they? Let us find out.

Affordability

Everyone desires an affordable home loan. Whether you need a joint home loan or are buying it independently, you must surely judge the affordability first. The lending sector has become competitive with multiple lenders in the market. However, it means more choice for you, i.e., the borrower. Make sure the loan you choose doesn’t give you financial burden.

Buying your dream home is one of your life goals. Others goals, like children’s higher education, retirement, etc., need equal attention. Hence, avail a loan you can afford and pay without difficulties. Find out if your lender:

• Offers the facility of breaking the down payment amount into small chunks. So, you can pay over a period of time instead of a lump sum. Allowing down payment to be paid in parts makes smoother disbursement. It comes in handy during situations when the income of household is under stress.
• Has the provision of lowering EMIs and gradually increasing them with the tenure. This ensures you don’t have to settle for a small home due to lack of funds.

These provisions may look minor. But, they go a long way in making sure that you get a profitable deal. It can help you fulfill one of your biggest life goals.

Also Read: 5 Ways to Increase Home Loan Eligibility

Flexibility in Repayment

Home loans require you to pay EMIs for 10 to 15 years, or even more. However, financial situations change with time. As you move ahead, you need to shoulder extra responsibilities. Disposable income changes and other expenses may shoot up. In such a scenario, paying EMIs can be challenging.

Before applying for a home loan, find out the flexibility in repayment. Talk to your lender to find out if you can decrease or increase the EMI amount as per your situation. For example, when unimportant expenses are high or there’s a break in active income, check if you can avail EMI breaks without affecting your credit score.

Repayment flexibility gives you peace of mind when you don’t have the required funds to pay EMIs. On the other hand, firm repayment terms can give you sleepless nights if you fail to repay due to a shortage of funds.

You can also calculate your monthly EMI payment by using the Home Loan EMI calculator here.

Level of Customer Service

What’s the point of availing a Home loan from a lender who is not available to solve your queries or doubts when needed? Calls and emails unanswered or not satisfactorily resolved can sour the deal.

Hence, before applying, check the quality of customer service. Home loan application isn’t merely confined to signing the loan documents. It’s about understanding what you are getting into. It is about having a complete understanding of the jargon(s), and a lot more. Queries like home loan eligibility, home loan tax benefits are mostly commonly asked by many borrowers. You should clarify these before applying for home loan.

Level of customer service also involves the inclusion of digital tools and systems. It should make it quick to avail loan and be informed at every stage of the loan process. Lenders such as Godrej Capital offer Zero Touch Loans where the home loan process is contact-free. It includes features such as:

• Video KYC
• E-sign
• Document delivery and pick-up service

Go through online reviews and talk to existing customers of the lender. It will help you understand how well the lender serves its customers throughout the loan journey. Don’t take everything at face value and do your independent research to understand the lender’s level of customer service.

It’s important to choose home loans from reputed and established lenders who have a well-defined system to serve customer queries and grievances.

Also Read: Financing Home Ownership: Here’s How to Go About It

Lender’s Concurrence With the RBI

This is perhaps one of the most overlooked aspects of home loan. You must ensure that your chosen lender has the license from RBI to disburse loans. Home loan scams are not new, and to ensure you are not cheated, make sure your lender is RBI certified. Equally important is to make sure the lender follows loan to value ratio and risk weights.

Loan-to-value ratio measures the lending risk that lenders undertake before approving a home loan. As per RBI guidelines, lenders can not include stamp duty, registration charges, and other documentation charges while calculating the LTV ratio. However, in cases where the cost of the house doesn’t exceed INR 10 lakhs, lenders may include these charges while calculating the LTV ratio. Also, as per RBI:

The spread amount differs across lenders. However, it remains constant throughout the loan tenure. On the other hand, if index rates move up, you need to pay a higher EMI and vice-versa.

Lending institutions can’t levy foreclosure/ pre-payment penalties on home loans availed under floating rate of interest.

When requested, lenders must reveal the loan’s annual percentage rates (APR). APR takes not only the home loan rate of interest but also other fees and charges that you need to pay.

In case your loan application is rejected, the lender must provide valid reasons for the same.

Also Read: Decoding Commonly Used Home Loan Terminologies

Conclusion

By now, you must have realized that home loan rate of interest is not the only criteria you should look for opting for a loan. There are more aspects to it. Read the fine print carefully to know the various charges, late payment fees, etc., before going ahead. Choose carefully and pick the best home loan as per your needs. Advantages of home loan are plenty; make sure you also consider your financial situation before applying.

Apply now for a home loan

Disclaimer:

The contents of this article are for information purposes only and not a financial advisory. The information is subject to update, revision, and amendment and may change materially.
The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its Affiliates to any requirements.
Godrej Capital or its Affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any decisions, financial or otherwise based on the contents and information mentioned. For more information, please visit www.godrejcapital.com