Taking a home loan is a pivotal financial decision that can shape your future in more ways than one. The right home loan can mean low interest rates and affordable monthly payments granting you the financial confidence needed for a robust future. Yet on the flip side, an ill-suited home loan can loom over your financial well-being and life goals.

As an endeavour which demands enormous responsibility and diligence, here are some pointers that you can use to get started on your home loan journey.

Research-Driven Approach

Research should drive your home loan choice. The various options available in the market and the nuanced differences between these options will only be clear to you through diligent research. You can start your research by comparing the interest rates of the banks. 

Thankfully, many banks as well as professional loan aggregators give you access to free online home loan EMI calculator tools. With these tools, you can calculate the EMI you must pay based on the loan amount and the interest rate. Most banks also have webpages and blogs which clarify and compare their home loan offerings. All of these tools can be used to make your decision process simpler. 

Additionally, some real estate platforms provide everything under the roof, integrating and simplifying your efforts. Which means that you can find the property that you are looking for and get the best home loan option meeting your needs. You would be offered comparison from all banks and NBFCs and you can choose the best loan provider that matches your profile and gives the best interest rates. This is a much easier way of doing this then going to individual banks to figure out what’s best for you.

While researching, also be vigilant about additional expenses such as processing fees, legal charges, stamp duty and the loan turnaround time.

Floating or Fixed Rates

A fixed-rate bank loan has an interest rate which remains fixed, as opposed to a floating interest rate which changes according to RBI’s Repo Rate. When deciding to opt for a fixed or floating interest rate on your home loan, consider the prevailing socio-economic conditions.

For example, if the RBI frequently adjusts the repo rate due to economic uncertainties or inflation concerns, you may opt for a fixed-rate home loan. This choice will provide a stable interest rate that won’t change despite fluctuations in the market. However, given the current interest rates are at the ever highest, the smarter choice right now would be to get into a floating rate regime as the rates are expected to come down soon.

Check Your Salary Appetite

Don’t take a home loan without properly evaluating how big a loan you can afford. Naturally, your salary is going to form the bedrock of your home loan aspirations. Start by estimating what fraction of your monthly income you can set aside for loan EMI payments. If you are overwhelmed by the total debt amount, remind yourself that your career is an ever-progressing journey while your loan amount is going to remain constant. Think about it – in the next five years, your salary and lifestyle are bound to improve. With balanced career and lifestyle choices, you can easily manage and close your home loan.

Know Your Risks

Loans can be Risky—If you don’t meet loan repayments as required, you might have to face consequences such as a late repayment fee, higher interest rate or legal actions. All of this can adversely affect your financial and psychological situation. A thorough risk assessment will ensure that you make an informed choice.

However, this again comes down to comparing the different loan options and choosing one with manageable risks. Also, you can rely on home loan insurance as a contingency measure: Home loan insurance will safeguard you from the financial and emotional strain that you might have to face from unforeseen events such as disability, death, or job loss.

The premium that is paid towards home loan insurance is applicable for tax benefits. Home loan insurance is important for the borrowers as it ensures that the dependents of the borrowers don’t become homeless in his/her absence or crisis situation.

Consider a Home Loan with an Overdraft Facility

Some home loans have an overdraft facility–this means that you can deposit extra money into your home loan account, which will be considered as a pre-payment towards the loan. You can channel this extra money from your salary bonus or your savings. The benefit of an overdraft facility is that you can reduce the total amount that you owe on your loan. Given that the interest that you pay on the loan is calculated on the remaining amount, the home loan overdraft facility will help you save a lot of money, and give you more flexibility in terms of loan repayment as well. Now this facility is offered by most PSUs and private banks.

Maintain A Healthy Credit Score

Make sure that you always maintain a healthy credit score. Lenders view it as a sign of trustworthiness, resulting in enhanced eligibility and approval for a larger loan amount along with favourable interest rates. If possible, go for a joint home loan instead of an individual one. With a joint home loan, the responsibility of the loan will be shared with a co-applicant who is your spouse or family member. This will earn you higher eligibility and tax benefits as well.

Utilize Builder Collaborations and Government Subsidies if applicable

Another smart strategy is to make use of builder collaborations and Government subsidy options. In the case of primary properties, builders often have tie-ups with banks offering home loans. The builder’s reputation can get you access to lower interest rates, streamlined processing, potential discounts and reduced documentation hassles. Similarly, you can also inquire about government-backed schemes or subsidies that may offer financial assistance with homeownership.

Choosing the best home loan is a pathway to shaping your future with confidence and security. As you stand at the threshold of one of the most impactful decisions of your life, make sure you navigate this financial journey with the utmost knowledge and foresight to ensure decades of stability and peace for you and your loved ones.

(By Saurabh Garg, Co-founder & Chief Business Officer, NoBroker.com. Views are personal)