5 tips for Home loans

5 Easy Ways To Manage Your Home Loan

If you’ve taken a Home Loan or plan to take one, here are a couple of tricks up your sleeve to manage it better. Stay ahead of your home loan EMI with these 5 simple tips.

Make repayment a priority

Paying EMIs on time boosts your creditworthiness. It may be difficult at first, but you must remember that a good credit history is an essential part of your financial journey. Future lenders judge your credibility based on your Credit Score. Failure to pay your Home Loan EMIs on time take a major blow on your Credit Score. As a result, the chances of your loan and Credit Card applications getting rejected in future increase significantly.

Bonus EMI Tip to make sure you maintain your creditworthiness: Schedule the EMI close to your salary date. This ensures sufficient funds in your account and minimize chances of default due to lack of funds.

Try not to skip any home loan EMI, maintain your credit score to avoid any penalties from your lender.

Use lump sums to prepay

Paying off your Home Loan as soon as you can is the one thing every homeowner dreams of. So, opting for a high monthly payment can help you reduce the loan tenure. As a result, the total interest that you’re supposed to pay to the lender also goes down. By opting to pay more every month, you reduce your own financial burden. This helps an individual invest in other projects of life like retirement planning, a car loan or even a second home.

Pay an extra EMI every year

Paying an extra EMI every year can be tough initially. But it helps put to rest your home loan. There is usually no prepayment charge for floating rate term loans. By paying an extra EMI every year, you can reduce your overall outstanding principal amount. Lenders are unlikely to complain if you repay a little extra every year. Over a 10-12 year period you find your loan paid off soon, erasing the stress of the loan.

Switch to a lower interest rate

Be aware of market fluctuations and updated with reduced loan interest rates available by different banks. Switching to a lower interest rate than your existing one will shave a few years off your loan.

P.S. – But be careful. Don’t jump too many times at low-interest rate differences. If you’re getting a good dip in the rate of interest, you should definitely consider switching. But in case the difference isn’t much, it might be a bad idea to opt for that switch.

Get the math right

There are tools available online by banks and NBFCs that help you determine your financials when you repay a Home loan. For example: The Home Loan EMI calculator gives a clear understanding of monthly EMIs when you enter the details of your loan amount, tenure, interest rate, and processing fee calculation.

Loan amount: You have decided on a property and are aware of its price. After you have acquired your down payment, you will have a better idea of what loan amount you need to apply for. You then have an idea of the amount of your EMI’s.

Tenure Of Home Loan: Decided the loan amount, choose the tenure you would like to opt for, starting from 6 months to 30 years. Keep in mind, the longer the tenure of your loan, the higher the total amount to be paid back will be.

Interest Rate And Processing Fee: The next thing you need to enter is the interest rate offered by your preferred bank. Generally, banks have a 2% processing fee on Home Loans which needs to be accounted for as well when calculating your monthly EMI.

Prepayment Option: Some people prefer to prepay a certain amount of their loan. The Home Loan EMI calculator gives you an option to specify whether you wish to prepay your loan amount. Your monthly Home Loan EMI amount is calculated based on whether you choose a Yes or No on the prepayment option.

The Home Loan EMI calculator is a simple, fast and reliable source of information to calculate your Home Loan EMI’s.

Do A Quick Rain Check Before You Apply For A Loan For A Quicker Procedure

Step 1: You can also use our loan calculators to check your eligibility and you’ll get an assurance of your current capacity.

Step 2: Let HomeCapital take care of your down payment requirements

home-loan-eligibility

Home Loans – How To Check Your Eligibility

Home loans and the whole process associated with them may seem like an unending task, but let us remind you that we live in 2019. The internet and a plethora of startups have just made our lives and the home loan process extremely simple. We’d like you to sit back and relax as we spread out the basics for starters.

Here are a few questions you need to ask yourself about home loans.

Home Loans and Their Eligibility Criteria

Home loan eligibility is dependent on an individual’s income and their repayment capacity. There are various universal factors that determine this. Age is an important aspect. The present age and the working years that an applicant has recorded plays a major role. This is also connected to their present and future financial position of the individual. However maximum loan tenure is generally capped at 30 years.

Your Credit or CIBIL Score

Keep a track of your credit score. This score makes it easier to get approved for a housing loan. Your score could vary from 300- 900 points, depending on the individual’s past loan or credit repayment record. A good credit score is equivalent to 750+ points and above. Lenders also take into account other Financial Obligations such as an existing car loan, credit card debt, etc.

A Co-applicant: Is it necessary?

Firstly in order to proceed with this point, we need to distinguish between a co-owner and a co-applicant. A co-owner is a joint owner of the property whereas a co-applicant need not be a part-owner of the property.

All co-owners of the property will have to be co-applicants of the home loan. However, all co-applicants need not necessarily be co-owners and this is the difference a buyer has to keep in mind. It is their income which is considered for credit.

Adding a co-applicant to a home loan helps to increase your loan eligibility. You can also buy a bigger home in your preferred location and there could be many tax benefits.

What is the maximum borrowing amount for home loans?

Before you plan on purchasing a home by obtaining a loan, you must keep in mind the ‘own contribution’ factor. This is the down payment that most lenders require. It comprises of at least 10-20% of the price of the home in question. The rest, which is 80-90% of the property value, is then financed by the lender. The total amount should also include registration, transfer, and stamp duty charges.

Even though the lender calculates a higher eligible amount, it is not necessary to borrow that amount or you could forget the hassle associated with down payments and check out HomeCapital Services – Where the down payment is taken care off!

What documents does an applicant need?

The basic documents that you require for a home loan are listed below.

  1. Application form
  2. Photo
  3. Identity proof
  4. Address proof
  5. Salary slip/ Form 16(Income Tax return)
  6. Bank account statement (the last 6 months bank statements)

Keep these documents handy always!

Check your rate of interest

It is crucial to check interest rates by various banks and NBFCs. This will help you make a choice better suited to your financial needs. Keep in mind the different types of interest rates that are currently provided; Fixed Interest rates and floating interest rates.

In a fixed interest home loan, the rate does not change throughout the loan tenor, irrespective of market fluctuations. The benefits include the ability to plan long-term. This makes it easy to budget other expenses. Customers also do not expect any future risks.

However in floating interest rates, the interest charges on your home loan changes to the tune of current most lending rates of the bank. The rate is linked to the latest published rate of the bank. This depends on multiple factors. After 2016, MCLR i.e. Marginal Cost of Funds-Based Lending Rate is also applicable only for floating rate-based loans.

Learning about your EMIs

When it’s time for your repayment installments, keep a tab on the tenure that you are picking to pay back your loan. Though smaller installments seem like the wiser choice, the longer duration and higher interest rates may not be the best option for many. Pick a repayment that is better suited for you.

Delayed start of EMI payments

In this type of loan, the payment of equated monthly installments (EMIs) begins at a later date. This is only available to salaried and working professionals aged between 21 years and 45 years and requires a highly secure job along with decent annual increments.

An Increasing EMI

In such loans, you can avail a higher loan amount and pay lower EMIs in the initial years. It then increases with the assumed increase in your income. The repayment schedule is linked to the expected growth in one’s income. If the salary increase falters in the years ahead, the repayment may become difficult.

A Decreasing EMI

The EMI is higher during the initial years and subsequently decreases in the later years. A higher EMI can also mean higher interest in the initial years. However, this will help pay off the loan at a faster rate.

Home loans with longer repayment tenures

Many banks also offer repayment products that are more than 30 years of duration. These, however, depend on the age and salary of the individual and the interest rates vary according to the financial status of the person. He could be middle-aged or even a freelancer.

An important note to remember is to make sure your EMI doesn’t exceed 40% of your total income.

Banks Vs Non-banking financial companies (NBFCs)

After you have taken into consideration the different types of loans that are available, you should also consider the advantages and disadvantages of both banks as lenders and Housing financial companies as lenders.

For instance, the best interest rates are always offered by a bank. But, if you have a low credit score, an NBFC could be better suited for you. It all depends on the type of services that you need. If you use banking services along with the home loan, the choice is a bank,

If it is only a housing loan, then you can evaluate your options by comparing associated charges and facilities provided the bank and HFC players.

Also, do your research before you apply for any of the two and always read the document carefully before signing. It is better to be safe and to have a clear understanding of your housing loan.