Advantages of a Housing Loan - Home Loan Blog - Tata Capital

Home Loan Features to Consider Before Applying

Mar 08, 2017

When most buyers shop for home loans, the biggest deciding factor is about the home loan interest rates. Ofcourse taking a loan at the cheapest possible rate is a no-brainer. But that is not the only factor that should be considered.

Let's take a look at some other home loan features that you need to consider before applying for your home loan.

Loan eligibility: You just cannot go and borrow any amount that you wish. Amount that lenders will sanction will depend on you credit history, current income, job stability, current loan obligations, etc. So before applying for the loan, you should be clear about the EMI you can comfortably manage. Also lenders will only lend upto 80% to 90% of the total cost of the property irrespective of your EMI servicing capability. So you need to be ready to pay upto 20% of the property price on your own.

Interest Rates: This is a very obvious one. Even a small difference in interest rate can have significant impact. For example, there is a difference of about Rs 3.2 lacs in two loans of Rs 40 lacs (20 year tenure), having two different rates of interests - 9.5% and 10.0%. So negotiating to get the least possible interest rate is very important for borrowers.

Fixed / Variable Rates of Interest: Home loans can have either of the 2 types of interest rates - fixed rate and variable rate. In fixed interest rate loans, the EMI does not change during the repayment tenure. On the other hand the EMI changes with changes in interest rate in case of variable rate loans. So the choice of home loan interest rate, will impact your future EMIs.

Processing fees: This fee varies from lender to lender and can be upto 1% of the loan amount. The lower it is, better it will be for the borrower. Just remember that it can be negotiated for with the lenders.

Prepayment charges: This is levied when you want to pay off the loan or a part of it, before the end of actual tenure. Lenders levy a prepayment penalty in case of fixed rate loans on the outstanding amount. So if you think you will be prepaying your loan in future, make sure to have an idea about the prepayment charges.

These are some of the home loan features that you need to pay attention to. Home loans are costly transactions and hence, you need to be aware of all possibilities of saving money on various fees applicable. So make sure to do your due diligence and not just focus on interest rates alone, when you apply for the home loan.