Essential Home Loan Factors To Consider Before Choosing Your Lender

Posted on Monday, December 5th, 2022 | By IndusInd Bank

Are you approaching the milestone of purchasing your dream home? Congratulations on deciding on one of the biggest investments of your life. To make it a possibility, you will require substantial financial support and planning. Instead of liquidating fixed deposits or selling off your market holdings, a better idea would be to take a home loan.

If you are on the verge of applying for one, there are a few key elements to consider. These include the entire loan process, tenure availability, processing time, hidden charges, and more. Here is a checklist of the elements you must examine carefully before applying for home loan.

1. Transparency

The first thing you must consider before applying for home loan is the entire procedure involved. Do this to prepare in advance and shorten your home loan processing time.

 A credible bank will transparently list out the steps involved in the home loan process, on their web portal. These typically include filling out an online or offline home loan application form, attaching the relevant documents, waiting for verification and validation and finally receiving an approval letter.

2. Customer Service

Robust customer service is essential for any home loan borrower. You can assess a bank’s customer service by asking the following questions.

• How attentive and quick is the bank with query resolution?
• How long do they take to resolve a customer issue?
• How seamlessly does the bank expedite the entire loan process? 

You can answer some of these questions by directly interacting with the bank before applying. You can also study online reviews or seek recommendations from your family, friends and colleagues to assess the customer service of your chosen bank

3. Interest Rate

Sure, you should consider different interest rates and settle for the best. But, the lowest possible rate is not always the best option. You must compare these rates with the loan tenures. You may be eligible for a low-interest rate, but only for a short tenure or vice versa.

Also, you should know about floating and fixed interest rates. Floating or variable home loan interest rates are subject to change during the loan tenure. These rates are linked to RBI’s lending rate or repo rate. You can opt for this option when there is a trend of decreasing home loan interest rates.

Fixed home loan rates are not subject to change, and are an advisable choice if you observe a trend of increasing home loan interest rates.

4. Tenure Flexibility

The most affordable home loan is not necessarily the one that comes at the lowest rate of interest, but must also have an agreeable repayment tenure. So, be sure to consider the tenure range a bank offers, and whether that fits your needs.

The right tenure doesn’t make your EMI feel like a burden and you can repay it without curbing your lifestyle.

 5. Hidden Fees and Charges     

Before signing a home loan contract, it’s critical to learn about certain hidden fees. The most common ones may include:

Loan processing fee –

Banks levy a processing fee, which covers all administrative costs of issuing a loan.

Bounce charges –

Defaulting on your EMI attracts this penalty. You must always keep enough balance in your linked account to ensure that you are not a defaulter

6. Repayment Capability

It’s important to know the loan amount available to you versus the loan amount you can afford to pay back as EMIs in the long term. You can base this calculation on analysing your current as well as future income. You must also factor in retirement or any alternative income sources that can be used to pay off EMIs.

While doing this, you must also account for external variables that may affect repayment capabilities, such as medical expenses and other exigencies.  After estimating your income and deducting emergency funds and savings, you can find out your true EMI payment capability. Know that it can change with time and an increase in income levels may help you prepay your loan.

Calculating your repayment capability helps you understand the home loan amount you should borrow.

 7. Taxation

Consider the tax benefits of a home loan. The Indian Government lets borrowers claim a tax rebate of up to Rs. 2 lakhs under Section 24. This rebate applies to the interest component of your loan and is over and above the tax rebate of Rs. 1.5 lakhs available under Section 80C.   

The Bottom Line

Looking for a bank that offers a transparent and seamless application process at competitive interest rates, flexible tenures and minimal paperwork? If yes, then partner with IndusInd Bank! Explore our customisable variety of home loans. From top-up loans to balance transfer and home renovation loans, we offer several housing finance services that suit your personalized needs.

Visit the Home loan section on our website to know more.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision.  IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.