According to reports, the home loan market may rise by 17%-18% in 2019. One of the primary reasons behind this growth is the Pradhan Mantri Awas Yojana (PMAY).
The PMAY offers subsidies on a house construction loan to first-time borrowers under the Credit-Linked Subsidy Scheme (CLSS). Beneficiaries of this scheme are the Economically Weaker Section, the Middle Income Group, and the Low Income Group.
Not only the PMAY but another factor that is driving the growth of home loans is its easy availability. Today, you can avail a loan without any hassle thanks to NBFCs. You also gain tax benefits when availing a joint home loan.
Some of the tips that you should consider before taking a home loan are:
Make Sure You Are Eligible For The Loan
The first tip to consider is to check whether you qualify for a loan:
Age between 23 and 62 years.
Minimum work experience of 3 years.
Age between 25 and 70 years.
Minimum 5 years of experience in the current business.
Apply For The Right Loan Amount
Lenders determine the loan to value (LTV) while processing your loan application. The LTV is the ratio between the loan amount and property price.
Similar to a vehicle loan, financial institutions will finance a part of the total evaluation value of your property. They will consider your eligibility and financial capability to determine the loan to value of your application. If you meet all criteria and requirements satisfactorily, you can gain a higher percentage of the total property value as the loan.
You have to invest the remaining part as a down payment. A high LTV means you can buy a home with a low down payment.
Hence, use a home loan eligibility calculator. This calculator tells you the amount you are eligible for based on your income/revenue, existing loans, etc.
Calculate The EMIs And Choose The Right Tenor
Your EMIs depend on the tenor you want – a longer tenor lowers your EMIs and vice versa. However, a longer tenor will also increase the total interest payable and vice versa.
For example, say you have taken a house construction loan of Rs. 20 Lakh at a 9% rate of interest.
For a 10-year tenor, your EMIs will be Rs. 25,000 (approx.) and the total interest payable, Rs. 1 Lakh (approx.).
For a 15-year tenor, your EMIs will be Rs. 20,000 (approx.) and the total interest payable, Rs. 1.6 Lakh (approx.).
It is best to use a home loan EMI calculator to determine the EMIs and choose the correct tenor.
Arrange All The Necessary Documents
Financial institutions need the following documents mandatorily to sanction a home loan:
KYC documents – Voter ID, Passport, Driving License, PAN, Aadhaar, etc.
Address proof – Latest electricity/telephone bill, house rent agreement, any KYC document with the permanent address, etc.
Bank account statement of the previous 6 months.
Salaried applicants have to produce Form 16 or the latest salary slips while self-employed customers have to provide proof of business existence.
Choose The Lender Wisely
The final step is to select the right lender. Start by comparing the home construction loan interest rates and then move on to the charges. Some of the charges that you may incur are:
Processing fees (one time)
EMI bounce charges (applicable with each EMI bounce)
Penal interest (applicable every month and may also include tax)
Mortgage orientation fee (one time)
Secure fee (one time)
Loan statement charges (charged every time you seek a loan statement)
Foreclosure and part pre-payment charges are some that you also check. However, there are several NBFCs that don’t charge anything extra when you avail of such facilities.
Follow these tips when you are planning to avail of a house construction loan. These tips will not only make it easier to get one but also make repayment less complicated.