Owning your dream home stands close to the top of every Indian’s checklist for a good life. As India continues its economic momentum, an increasing number of citizens can realistically aspire to become first-time homeowners. But with housing prices on the rise across India’s major cities, taking a home loan or mortgage loan is essential to turn the dream of owning a house into reality for most first-time buyers. Recent industry analysis predicts robust growth in home loans in 2024 and beyond, fuelled by rising incomes, rapid urbanization, and government incentives. However, navigating the complex process of availing a property loan can be confusing.
Therefore, to help make your home-buying journey smooth, here are 10 handy tips by Indian Estate Group (IEG), on availing the best home loan deal as a new property buyer in 2024 and beyond. So, let’s get started!
Top 10 Home Loan Tips by Indian Estate Group for New Homebuyers
- Start with researching lenders and interest rates
The first step towards getting a home loan is researching different banks and housing finance companies and comparing their interest rates. With RBI having hiked rates in 2022-23 to control inflation, interest rates are expected to stabilize in 2024. Still, keep an eye out for lenders offering lower interest rates closer to your home purchase date. Non-banking financial companies may offer better home loan interest rates at times as compared to banks.
- Check Your Credit Score
Before applying for a home loan, check your credit score on portals like CIBIL. A score above 750 unlocks the best interest rates. If below this, start building your score by paying credit card bills on time, limiting credit checks by lenders, and correcting errors in your credit report.
- Check eligibility and documents required
Before applying for a home loan, use online eligibility calculators to check the amount you can borrow. Gather required documents like identity and address proof, income statements, bank statements, and credit reports ahead of time to accelerate the home loan processing. Having all the paperwork ready will minimize the chances of home loan rejection.
- Evaluate both floating and fixed interest rates
Comparing prevailing rates across banks and NBFCs. Opt for longer reset periods for protection against frequent rate swings. Also, choose between fixed and floating home loan interest rates depending on the market outlook. Floating rates start cheaper but carry the risk of volatility, while fixed rates remain static throughout the tenure, providing some protection against rising interest rates.
- Check all repayment options
Evaluate both principle and interest (P&I) and interest only (IO) repayment structures for your home loan. P&I requires repaying a portion of the principal every month in addition to the interest, while IO involves paying interest initially and higher EMIs later. See which aligns better with your cash flows. Also, ask about moratorium periods offered.
- Pay attention to processing fees and other charges
In addition to interest rates, compare processing fees and other charges levied by different lenders. This includes administrative fees, technical valuation charges, and prepayment penalties if you foreclose your home loan early. Opting for minimal processing fees and zero prepayment charges can save you a substantial amount over the long term.
- Arrange for the down payment and make a substantial down payment
Most lenders fund up to 90% of property value. You need to arrange for the rest plus registration and other charges, which could tally to 20% of the asset cost. Start early to accumulate through avenues like savings accounts, liquid funds, bonds or even family. Also, putting down a 20-30% down payment upfront substantially reduces your interest outgo over your loan’s lifetime and enhances eligibility. Start saving early through SIPs and short-term funds to accumulate funds for down payment instead of borrowing the full home loan amount.
- Seek Tax Benefits
Home loans come with tax rebates on principal and interest payments under Sections 24 and 80C. Additionally, the credit-linked subsidy scheme under PMAY subsidizes EMIs for first-time buyers in mid to lower-income categories. Claim these provisions for saving money on your home loan.
- Consider co-applying with a co-borrower
Adding a co-applicant for your home loan with a strong credit record and high, stable income tangibly improves your eligibility amount and negotiating position. The incomes of both co-applicants are accounted for, reducing the risk perceived by the lender.
- Seek expert guidance
First-timers may easily get overwhelmed navigating the home loan world. So working with advisors or consultants to answer your queries will help make well-informed borrowing decisions.
The Bottom Line
Ensuring you get the best home loan to turn your dream of owning a home into reality requires research, financial prudence, and negotiation skills. While buying a property is a complex affair, following these 10 tips as a first-time house loan borrower will set you firmly on the path to availing an optimal mortgage loan in 2024 and thereafter.
Partnering with the right lender and advisor can further smoothen the intricate journey of your maiden property purchase. And when it comes to top-notch Real Estate Services in India, Indian Estate Group (IEG) is second to none. So, connect with Indian Estate Group (IEG) today and embark on your homeownership aspirations backed by robust financial preparation and savvy decision-making.
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