A "low interest" loan shouldn't mean you have very little interest in paying it back!
If this is your first time buying a home, you may already have explored many home loan options in the market. You may also be anxious about many factors such as the interest rates, the loan amount, margin, etc., as a home loan is a long-time commitment that can stretch up to 30 years. Do not worry, as we have provided some tips for you below which will ease your anxiety around home loans.
Before buying a home, the first thing what most of us do, perhaps, is going through property listings to search for our dream home. This is necessary but the first thing we should ideally do is to evaluate our financial health and see if we can afford to repay the equated monthly instalment (EMI) of the home loan. Have a look at your savings and see if you have enough to make a down payment. Do not consider taking a home loan unless you have enough savings for emergencies as well.
If you want to get the best deals on home loans, you should shop around to check for the interest rates that various lenders are offering. This will allow you to compare the benefits, including interest rates, and help you make an informed decision. Once you decide on the lender after comparing the benefits, it is a good idea to use the Home Loan EMI Calculator tool to calculate the EMI amount that you will need to pay towards your home loan. Doing so will help you assess if you can afford to pay the EMIs.
Under the Pradhan Mantri Awas Yojana (PMAY), you can take advantage of the Credit Linked Subsidy Scheme (CLSS) offered by reputed lending institutions on a home loan. The best thing about these schemes, besides offering a subsidy on the interest rates, is that it is available only to first time home buyers. Another advantage that PMAY offers is that you need not pay any processing fee.
As mentioned earlier, you should have enough savings to be able to make a down payment for a home loan after keeping aside some amount for emergencies. Also, before you get the loan, you will be required to pay somewhere between 10% and 25% of the property as down payment. For instance, if you are looking to buy a property worth Rs.35 lakh, you may have to pay a down payment of about Rs.7 lakh.
Choosing a longer repayment tenure will reduce the burden of high EMIs but in the long run, you will end up paying higher interest. Hence, you should choose a tenure that is comparatively shorter but for which you can afford to pay the EMI comfortably. The money that you would save on the interest can instead, be used to invest in various financial products such as mutual funds, fixed deposits (FDs), etc. Investing in these products can earn you good returns.
Do not get carried away by flashy interiors and exteriors of the property and buy a house that is beyond your budget. Instead, choose a property that has adequate facilities but is priced reasonably so that paying the EMIs do not strain your pocket. Also, ensure that the property you buy is at a convenient location while ensuring that the builder is reputable. Lenders will look at the builder’s reputation before approving your home loan.
By following the above tips, you can now take a home loan to purchase your dream home. Do not forget to check out the interest rates offered by top lenders on home loans which we have listed below:
| Name of the Lender | Interest Rates | Fees & Charges |
| State Bank of India | 6.95% - 7.50% p.a. | Rs.2,000 – Rs.10,000 |
| HDFC Ltd. | 6.95%* - 8.20% p.a. | Up to 0.50% |
| ICICI Bank | 7.70% - 8.80% p.a. | 0.50% to 1% |
| Axis Bank | 7.75% - 8.55% p.a. | Up to 1% |
| LIC Housing Finance Limited | 7.40% p.a. | Rs. 10,000- Rs.15,000 (+Service Tax) |
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