While home loan rate of interest is an essential consideration for most borrowers, financial prudence calls for factoring in various other parameters. Applying for a Home loan solely based on the rate of interest rate can often become a tight noose for borrowers.

As home loan is a long-term commitment that involves a substantial amount of money, you must look at other factors before signing the documents. What are they? Let us find out.

Affordability

Gauge the affordability quotient before applying for a home loan. The lending space has become competitive with multiple lenders in the market. However, it means more choice for you, i.e., the borrower. Make sure the loan opted for doesn’t stretch your finances and pinch your pocket hard.

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

• Offers the provision of breaking the down payment amount into small chunks that you can pay over a period of time instead of a lump sum. Allowing down payment to be paid in a staggered manner facilitates payment and comes in handy during situations like Covid when the income of most households 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.

   

While these provisions may look trivial, they go a long way in ensuring you get a profitable deal that helps you fulfill one of your biggest life goals.

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 discretionary expenses may shoot up. In such a scenario,serving EMIs can be challenging.

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

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

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, having a holistic understanding of the jargon(s), and a lot more.

Level of customer service also involves the inclusion of digital tools and systems into operations that make it quick to avail loan and be informed at every stage of the loan process. Lenders such as Godrej Housing Finance offer Zero Touch Loans where the home loan process is contact-free with 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 to gauge how well the lender serves its customers throughout the loan journey. Don’t take everything at face value and do your independent research to analyze the lender’s level of customer service.

It’s prudent to opt for home loans from reputed and established lenders who have a well-defined system to address customer queries and grievances.

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 duped, make sure your lender is RBI certified. Equally important is to make sure the lender abides by loan to value ratio and risk weights.

Loan-to-value ratio evaluates 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

   

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.

Godrej Capital is the financial services arm of Godrej Group which offers Home loans Loan Against Property and other secured loans. With innovative products and offerings, customers can get hassle-free loans on easy terms and conditions. Click here to know more about he offering..

Disclaimer: The above information is for illustrative purpose only. For more details,please refer to the product or service document and/or connect with our customer representative prior to making any financial decision.