Home Loans work as a boon for the homebuyers. They have fulfilled the dreams of many people to get their dream homes. While they are one of the most popular financing instruments, many people aren’t aware of how home loans actually work in India. Let’s see behind the scenes and understand how Home Loans work.
How do Home Loans work?
Banks accept deposits from the public and use them to lend to the borrowers. The interest earned from the borrowers is generally higher than the interest paid to the depositors. The difference constitutes the earnings of banks.
Whenever you decide to buy a home and determine the downpayment and loan required, you select the right lender and apply for the Home Loan. After you submit the application form along with all the supporting documents, the lender scrutinises your application, completes the Home Loan process and decides on approval or rejection thereof.
Tips to get a good Home Loan
Having understood how home loans work, here are some tips for securing a good home loan:
- Research the market and choose the right lender: You should research and compare different lenders before applying for a Home Loan. This will allow you to select the lender with the most affordable rates and flexible terms. Ideally, you should compare interest rates, other charges, eligibility criteria and customer service. Most lenders nowadays have an online presence. Therefore, it is effortless to compare lenders.
- Eligibility criteria: While comparing, you should also check out the eligibility criteria of different lenders. If you satisfy all the criteria, your loan application will be approved seamlessly. Usually, the eligibility criteria include age limit, residential status, income limit, employment type, and loan-to-value ratio (LTV) etc.
- Make sure you have a good credit score: A good credit score is essential for any loan approval. A credit score is a 3-digit numerical figure between 300 and 900 that depicts your creditworthiness and performance. The higher the credit score, the better the chances of loan approval. Ideally, it should be above 700.
- Understand the fees and charges: You should understand all the fees and charges associated with Home Loans before applying for the same. This normally includes interest rates, processing fees, administrative charges etc.
- Save funds for down payment and plan repayment in advance: Home Loans usually finance 80% of the cost of your home. However, you need to make a down payment from your own pocket to finance the remaining cost. Further, you can also prepay your Home Loan if you have excess funds to save interest costs.
- Keep all relevant documents handy: You should keep all the relevant documents handy before applying for the Home Loan to ensure quick application and processing. The documents normally required for Home Loans include identity proofs, address proofs, income tax returns, bank statements and property details. If you are applying for a joint Home Loan, then the above details of both applicants will be required.
How to find the right Home Loan?
To find the right home loan, you must find the right lender. You need to consider the above factors while searching for the right lender for your Home Loan. Axis Bank Home Loan has been quite popular among home buyers to finance their dream home. It offers low-interest rates, simple eligibility criteria and flexible terms. Starting from ₹3 lakhs, you can avail of loans up to ₹5 crores. There are no prepayment charges, and you have the flexibility to select between fixed and floating interest rates. Check out Axis Bank Home Loans now!
What is the interest rate on Home Loans?
The interest rate on Home Loans varies across different lenders. It also depends on your profile, whether you fulfil all the eligibility criteria and submit all the required documents or not. Further, your credit score is also an important determinant for the Home Loan interest rates. If you fulfil all the eligibility criteria, submit all the documents and have a good credit score, then you can get a Home Loan at some of the most affordable rates.
Also Read: 10 easy steps for the Home Loan application process
In a nutshell
Home loans serve as a blessing for homebuyers, realising the aspirations of many to own their dream homes. By exploring the intricacies behind home loans, you can make informed decisions and secure favorable terms that align with your needs and financial goals.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or 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. Please consult your financial advisor before making any financial decision.
