Home loans are one of the easiest ways to buy a residential property, especially if you are short on funds, which is the situation that most homebuyers face, primarily due to the ever-increasing prices of homes. However, home loans are a long-term commitment, with the loan tenor stretching up to 30 to 40 years in some cases.
Therefore, home loan borrowers must avail themselves of a home loan after carefully weighing their income and repayment capacity. They must also make every effort to secure the lowest home loan rates to ensure an affordable home loan. Here, we discuss simple tips that will allow you to avail of an affordable home loan and repay it comfortably.
Affordable Home Loans: Here’s How to Secure One
Research Lenders and Compare Offers
One of the first things that individuals planning to go for home loan finance must do is research lenders. Talking to different lenders operating in the market gives one an idea of the best offer that one can get. Further, it also allows loan borrowers to use the loan offers to negotiate for better loan terms and conditions. Once you have all the home loan offers in hand, use a home loan EMI calculator to figure out the most lucrative deal for you.
Maintain a High CIBIL Score
The CIBIL score is a 3-digit number from 300 to 900. It is indicative of a loan borrower’s creditworthiness and intent to repay their home loan EMIs on time without defaulting. People with high CIBIL scores are individuals who are highly creditworthy and can be trusted to repay their loans without defaulting. To be eligible for an affordable home loan, you must make sure you have a CIBIL score of at least 750. The closer you are to 900, the easier it becomes for you to negotiate for the lowest home loan rates and other beneficial loan terms and conditions.
Opt for a Low LTV Ratio Loan
The LTV ratio is important. It tells lenders what percentage of the pledged collateral’s value is the loan borrower asking for as a home loan. High LTV ratio loans are loans where the loan borrower is asking for a high loan amount. These loans pose a higher risk to the lenders as a high loan amount leads to high home loan EMIs and therefore, increased chances of a loan default. If you want to establish candidature for an affordable home loan, opt for a low LTV ratio loan. Plan beforehand and make as high a down payment as possible. This will help you keep your loan EMIs low and repay the loan easily and comfortably and also negotiate for the lowest home loan rates.
Apply for a Home Loan During the Festive Season
In India, during the festive season, home loan lenders come up with enticing loan offers. For instance, during the festive season, not only are home loan borrowers able to secure the lowest home loan rates but they are also able to negotiate for low processing fees and charges, which helps borrowers keep housing finance affordable.
Use the Home Loan Eligibility Calculator
If you are planning to apply for a home loan and want to secure an affordable home loan, you must use the home loan eligibility calculator, which is an online tool that home loan borrowers can use to calculate the home loan amount that they are eligible for. When you apply for a home loan amount that you qualify for, lenders have little reason to doubt your repayment capacity and therefore, loan approval becomes easy. So, always use a home loan eligibility calculator and apply for a home loan amount you qualify for.
Maintain a Low FOIR
The FOIR is another important metric that lenders take into account to assess the repayment capacity of a borrower. FOIR refers to the fixed obligation-to-income ratio. It is the percentage of one’s total income going towards covering debt. When a very high percentage of one’s income is already going towards debt repayment, the chances of a loan default increase significantly. Therefore, in this case, lenders generally charge higher home loan rates in India. If you wish to secure an affordable home loan, maintain your FOIR below 30%.
Final Words
These are some simple things you can do to increase your chances of securing an affordable home loan or home finance. Always plan your repayment strategy beforehand and keep all home loan documents ready to experience a hassle-free loan application process.