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What to look for in a #HomeLoan?

Is it the Interest Rate?

Yes, the first thing which comes to anyone’s mind is the Interest Rate.

“I want the lowest Rate of Interest for my home loan” is the first statement I hear from almost all my clients. It is important, but I believe it’s the last question to be asked.

Why?

Let’s see…

When purchasing a property whether it is Plot/Villa/Apartment/Resale Building/going for construction there are the listed things to be looked at first

Borrower’s perspective in terms of managing the finances:

  • My income matches the property I am going to purchase
  • I will be able to service my loan without a single EMI bounce for next 10/15/20/25/30 years
  • I have the margin money (difference between the actual cost of property & loan to be disbursed)
  • I have sufficient cash in my account for the property registration
  • I have additional amount for renovation or interiors (as the case maybe)
  • Existing expenses such as rent/loan EMI
  • Existing recurring investments such as RD/SIP/long term commitments

Property perspective in terms of the feasibility of property:

  • Type of property (depending on the Khata A/B/E/Panchayat etc)
  • Cost benefit analysis of the property
  • Locality where the property is situated (within city limits/ outside/ green/ yellow/ residential zone)
  • Benefits or amenities
  • Proximity to schools, colleges, shopping malls, supermarkets, offices
  • I am going to stay in the property or rent it out
  • When I am going to get the possession of the property (in case of under construction apartment)
  • The additional expenses of rent, maintenance till the possession of the property

Bank’s perspective in terms of the facilities extended by the banks:

  • Funding limits basis the property like 50 to 90% against market value of the property
  • Funding limits basis the income like 50 to 100% of the income basis salaried or self-employed
  • Whether the borrower has sufficient cash flow/income over and above the EMI commitment
  • Margin money proof (balance in the bank account)
  • Whether bank provides any funds for renovation or interiors
  • CIBIL/CRIF/Experian/Equifax etc rating of Individuals or companies respectively
  • Lastly, the Interest Rate (considering all the above aspects)

I would have mentioned a few of the pointers as per my knowledge basis the interactions with all my existing customers during the interaction of loan process, but there are multiple other factors which also affect the Interest Rate.

The borrowing is just a beginning of the asset relationship with a particular bank who is lending and a long standing relationship with them (at least for 5+ years) till the loan is getting completely repaid. 

Even after loan repayment customers might stay with the banker for their savings account/ credit cards/ investments or any other products purchased during the journey.

So, when you approach any funding/ loan consultants/ banker in future, my personal view is to go in the order of the questions mentioned (in the banking perspective, in particular) and we (the loan consultant fraternity) will ensure our clients get the best Rate of Interest available in the market.

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