Home loan gives you a chance to own a residential property and avail tax benefits. It helps you build an asset that you can use for multiple purposes. However, before you take a home loan, you must look at your budget and arrange money for down payment, which is about 10-20 per cent of the total property cost.
Once you have the money for down payment and property is selected, you can apply for a home loan. The loan needs to be repaid over a fixed period. You can avail income tax benefits for the principal loan amount and the interest repayment.
Let us look at some things to keep in mind before you apply for a home loan.
Borrow What You Can Afford
You must borrow only as much as you can afford through Equated Monthly Instalments (EMIs). A home loan is a long-term commitment. You would not want to miss an EMI or default your loan completely owing to unaffordable loan EMIs. Banks often allow EMIs up to 40% of your take-home loan salary.
Also Read: Taking a joint home loan? Check its pros and cons first
Apply What You Need
You must know your eligibility as if you apply for a high amount which you are not eligible for, your loan might get rejected. Once you know your loan eligibility, it becomes easy for you to arrange money for down payment.
Borrowing From Existing Lender
Often it is advised to borrow from the lender you already have existing relationship. It helps in processing your loan quickly as the bank already knows your credit history and personal details and can take less time in disbursing your loan.
Makes Most of a Good Credit Score
Banks often prefer to give loans to customers with a good repayment record and credit scored. A high credit score helps you get faster approval and disbursal. Banks may also lower the interest rates for customers having a high credit score.
Check Property Approvals
It is essential to check the legal approvals of project/property you are buying. It should have all regularly and environmental clearances to avoid a dispute later. Also check whether the banks have approved the project for loans. It helps in faster approvals of loan application.
Borrow Jointly for Higher Amount Loan
If you need a higher amount loan but your income does not allow that, you can consider taking a joint home loan with your spouse/parents or siblings. You can also borrow a longer-tenure loan. Your EMIs will be lower but your interest will be higher. Avoid taking decision in haste and factor in all the points before you sign the loan agreement.
The table below will help you compare the interest rates of around 15 banks and the EMIs for Rs 50-lakh loan for 20-year tenure. You can compare and borrow as per your eligibility and requirements.
Interest Rates & EMI on Home Loan
Compiled by BankBazaar.com
Note: Interest rate on Home Loan for all listed (BSE) Public & Pvt Banks (Excluding Small Finance Banks), as listed in their website are considered for data compilation as on 09 Nov 2022. Top 15 banks offering the lowest interest are listed in ascending order on the basis of interest rate i.e. bank offering lowest interest rate on home loan (lowest rate irrespective of loan amount and tenure) is placed at top and highest at the bottom. Lowest rate offered by the banks is considered in the table. EMI is calculated on the basis of Interest rate mentioned in the table for Rs 50 Lakh Loan with a tenure of 20 years (processing and other charges are assumed to be zero for EMI calculation); *NBFC entity.