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5 Tips to Get a Home Loan in India

By Chanel Rick - Jun 14,2022
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Once the cycle of earning begins, you automatically begin moving towards achieving different milestones. Once financially independent, start realising goals like saving for emergency funds, investing in mutual funds, etc. Your first home is one of the most significant milestones in your investment journey. 

In India, depending on the city or region you reside in, you might face various hurdles while investing in real estate. Prices of apartments and houses drastically change between cities and localities within them. This doesn’t mean you abandon your long-lasting dream! Through a home loan, you can manifest your homeownership desires into reality. 

Understanding Home Loans & their Benefits

A home loan allows you to borrow the necessary funds to purchase a property by offering it as collateral. Opt between adjustable or fixed interest rates, paid via EMIs. On completion of the loan repayment, the property’s title is transferred back to you. 

In 2020, CRIF India, which runs the credit bureau CRIF High Mark, reported 1.58 crore active loans from April to December. These loans were in the affordable segment, leading up to ₹35 lakhs and constituted 60% of the market by value. The value was estimated at nearly 90% in value in December 2020. 

With so many active home loans in India, aren’t you curious about its other benefits? Regardless of whether this is your first or second real estate acquisition, you can enjoy the following benefits. 

●    Balance Transfer: Easily switch to a different lender with lower interest rates mid-tenure 

●    Lower Interest Rates: Reap the benefits of fluctuating interest cycles with low-interest rate periods 

●    Tax Benefits: Deductions of up to ₹1.5 lakhs under Section 80C of IT Act, 1971

●    Second House Tax Benefits: Claim deductions on the entire amount of the housing loan interest paid under Section 24B of the IT Act. 

●    No Prepayment Penalties: Unlike other loans, home loans don’t penalise you on prepayment of loans with floating rates 

While home loan advertisements show a seamless application and approval process, it’s not always the case. Certain obstacles might stand in the way. These include low eligibility, non-refundable process fees, lack of repayment prospects, and poor transparency between banks and customers. 

5 Tips for Getting Home Loans 

To ensure you experience a hassle-free home loan process, we have assembled the top tips recommended by experts to guide you. Learning these key moves, you might be able to expedite the process or encounter fewer hurdles on the way. 

1. Save for Down Payment

Most home loans only cover a certain percentage of the total property value. Set aside some additional savings as a down payment for your real estate investment. But, remember – the down payment percentage ranges between 2.25%-20% of the overall purchase price of the property. 

2. Improve your Credit Score 

Naturally, those with well-maintained and high credit scores will receive better offers for home loans. Since a high credit score reflects positive behaviour, lenders are likely to sanction home loans in your favour. Experts suggest that a CIBIL score of 750+ is most favourable for receiving attractive interest rates on loans. 

3. Choose a Suitable Type of Loan 

While applying for home loans, choose one that best suits your requirements. Some prefer fixed-rate loans, but others opt for floating interest rates – don’t be influenced by others! Pick a home loan type that applies to your unique financial situation. 

4. Maintain your Credit Score 

Even after the loan has been sanctioned, you still need to maintain a high credit score. Post-approval, there’s still a high chance the lender will inspect your recent credit history again. To prevent any impediments, avoid applying for new credit cards, loans, etc. 

5. Compare Home Loan Offers 

Lastly, resist the urge to settle for the first home loan offer you receive! Avoid selecting home loans based on their low-interest rates. Various factors affect the estimated interest rate, making one loan more expensive than others – processing fees, points, etc. 

Contrasting to the commercials, getting your home loan sanctioned isn’t always breezy. Always make a checklist of different criteria before choosing a home loan offer – your dream home is just one loan away! 

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