Written by Nithya Rajeev | August 24, 2022
In India, the majority of would-be homeowners rely on home loans to raise the money needed to purchase their ideal residence. Purchasing a property is now a lot simpler than it once was thanks to the access to home loans. Since you won't have to spend all of your life savings on buying a home, it is the most financially sensible approach to obtain the funds. Moreover, when you apply for a house loan, you have the option to spread out the repayment of the money into tiny portions known as EMIs over a prolonged period of time (Equated Monthly Instalments).
First and foremost, there are two sorts of interest rates associated with house loans: floating and fixed interest rates. As long as the loan is ongoing, the interest rate will vary based on the state of the market and other economic factors. In contrast, the interest rate on a fixed-interest home loan is set at the moment the loan is obtained and continues thus for the duration of the loan.
Since floating interest rates are typically a few percent lower than fixed rates, many experts recommend taking out house loans with them. Additionally, compared to a home loan with a term deposit, the overall interest payment on a variable home loan rate loan is substantially lower over time.
Most people typically apply for a home loan to buy a new house or a home that is still being built. A home purchase loan is what it was. There are, however, numerous varieties of house loans on the market.
To buy a plot of land on which to construct your own home, you might ask for a home loan. Plot loan that's what we call this. To repair or renovate your house, you can also ask for a home loan. This is known as a home improvement or renovation loan. The money can be used to pay for interior decorating, flooring, painting, or other costs.
The finest house loan also has the important result of becoming a great tax-saving tool. You can take advantage of enticing tax benefits on your home and lower your yearly tax bill. According to Section 80C of the Indian Income Tax Act, you can receive a tax benefit of up to Rs. 1.5 lakhs on the repayment of the principal amount.
Additionally, Section 24 of the IT Act receives a tax credit on house loan interest repayment of up to Rs. 2 lakhs every fiscal year.
You can switch your loan to a new lender if you are dissatisfied with your current lender's services or if they offer a higher interest rate than in other lenders. This option is termed home refinancing or home loan balance transfer.
By paying off the outstanding sum at a lower interest rate, a home loan balance transfer allows you to lighten the burden of repayment.
The maximum loan amount is often decided by the lenders depending on their evaluation of a variety of parameters, such as your credit history, income, ability to repay the loan, age at the time of application, etc.
Before granting your application for a house loan, the lenders take into account a number of variables. Many middle-class Indians cannot afford to buy a home without taking out a loan due to the exorbitant prices of real estate properties.
Your loan application may be initially rejected by the lender if they have any cause to think you won't be able to pay back the loan on time. The following are some of the most frequent reasons financial institutions deny requests for mortgage loans:
A low credit score is the most frequent cause of home loan refusal. Your credit score, which consists of three digits, is established by credit bureaus depending on how you have previously used credit. You might not meet the lender's minimum credit score criteria if you have a record of creating late payments on loans or credit card bills. The majority of financial institutions want applicants for house loans to have a credit score of 650–700 or better.
The majority of lenders evaluate monthly income when evaluating whether to approve a loan. If you have a reliable source of income that is substantially more than the EMI amount, you would be able to pay the monthly EMIs. Financial institutions typically have a minimum income requirement for this.
Along with your monthly income, other criteria such as previous mortgages that you are still repaying and your career history will be factored. Your loan application can be turned down if you don't have a solid employment record or don't match the lender's minimum income standards.
In order for the borrower to comfortably repay the loan before retirement, the majority of Indian lenders encourage applicants for residential loans to be between the ages of 22 and 60.
However, the lender would account for your loan application with a shorter loan term if you are already in your late 50s and have only a few years till retiring.
If the lender has blacklisted the developer of the housing project, this is another frequent reason why lenders reject home loans. Consequently, your loan application may be denied if you approached a certain lender who has not given their approval to the developer of your house project.
Your application for a home loan can also be denied if the former owner or tenant who still resides in the property where you now reside was in default. Financial institutions typically place both defaulters' names and addresses on a blacklist.
It's easy to submit a request for a home. You can ensure a problem borrowing experience by carefully following the instructions.
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