Hyderabad: House prices are increasing steadily while interest rates are stabilising. A home loan is a long-term plan. Therefore, it is not enough to think that you can take a loan and buy a house just because the surplus amount was at your disposal. There are other factors also to consider. The key ones are...
How much do you save?
Your income is very important in determining loan eligibility. In this, too, how much is left over from expenses is crucial. Usually, lenders look at six months of bank account details. It helps you to know your income, expenses and surplus amount in detail. A person with financial discipline is recognised by banks if there is a surplus of at least 30 per cent of the income. If you don't have a 30-40 per cent surplus in your hands, it is better to postpone the decision to buy a house. Try to take a loan when you have enough savings.
How much money is at your disposal?
To buy a house.. first, the buyer has to pay some amount from his pocket. In banking parlance, this is known as a down payment. It is usually 10-20 per cent of the property value. After this is paid, the remaining amount will be loaned by the banks depending on eligibility.
Depending on the banks, the downpayment percentage varies. For example, suppose you want to buy a house for Rs 30 lakhs. If the down payment is at least 20 per cent, you have to pay Rs 6 lakhs. The higher the amount, the better. This can reduce the interest burden on the loan. Apart from this, other expenses like registration and stamp duty should also be taken into account. By all means, apply for a loan when you are ready.
Can instalments be paid?
Presently home loan interest rates range from 8.5% to 8.75%. If a loan of Rs 25 lakhs is taken for 20 years, the EMI will be up to Rs 22,000. We have to pay EMI every month regularly for 240 months even if the interest rates rise. So, regardless of monthly income and expenses, make sure that instalment payments do not stop. Go ahead only when you are confident that you can pay the instalments without compromising your expenses and living standards. It must be remembered that there must be some compromise in financial matters for at least three to five years.
Will the income increase?
Another thing to consider before applying for a loan is whether your income will increase soon. If there is such a possibility, there is no difficulty in paying instalments. At the same time, add some of the surplus amount you have to the home loan principal. By doing this regularly, the tenure will be reduced and the interest burden will not be heavy.
Take a joint account?
Taking a joint loan with a spouse has certain advantages as we can get a high loan amount. At the same time, the EMI burden can be shared by both. Both can claim exemption on home loan principal and interest under the provisions of Section 80C and Section 24. If the surplus amount is high, you can repay the loan quickly by paying some amount now and then.
Is the credit score good?
Those who want to take a new loan should check their credit score first. Lenders are somewhat positive when it is above 700 points. A low credit score may result in the rejection of the loan application. A higher score also gets some concession in the interest rate. So, check the score and correct any differences.
While taking a home loan, it is important to keep in mind how financially stable you are. Only when we are economically disciplined we can stay out of trouble. Even a tiny mistake can make it difficult to achieve your other goals. Review your financial situation from time to time. Wasteful expenditure should be controlled. Aim to pay off the loan amount as soon as possible, says Adhil Shetty, CEO, BankBazaar.
Also read: Planning for dream house? Focus on your credit score
