Your guide to choosing the right home loan for you

With the property rates in India touching the skies, the only way for one to own a home is by getting house loans. It’s a practice as old as time to buy property as investment and also to take loans to purchase new property. Years ago, our ancestors would take loans from the wealthy men in the village to expand their businesses and provide for their families. Today, that practice has been polished and now we can take home loans from banks, in a sophisticated, organised and official way.

Most people today, prefer to get their home loan online. This is because, like almost everything else, getting a home loan online is easier, more convenient and you can also explore more option in a one place than is possible for you to do in person. You can also find the best housing loan interest rates online and find the loan that suits your needs the best.

The processes of getting a home loan, housing loan tax benefits and choosing the right home loan can be a very daunting task, especially for someone who is a novice at finance matters, hence here’s a guide that will help you choose the right home loan for you.

1.   Eligibility: To get home loans you need to first check your eligibility. Salaried people usually find it easier to get home loans, but that does not mean that self employed people never get them either. If you can provide enough proof of income to satisfy your loan provider that you will repay the loan then your loan will get sanctioned. Another thing is the amount of loan you’re eligible for, this is based on your income, assets and your repayment capability.

2.  Housing loan interest rates: This is perhaps the most important thing that you should know and understand before you apply for a home loan. Housing loan interest rates are of two types, fixed and floating. A fixed interest rate is where you pay interest at the same rate throughout the term of your house loan. A flexible interest rate is when your interest is subject to market changes and can fluctuate due any change in the market.

3.  CIBIL Score: Your CIBIL or credit score is a very important factor to take into consideration when applying for a home loan. When you borrow or even apply for a loan you bank takes in to consideration the your credit score which includes your credit status, your spending habits and your income.

How a Joint Home Loan increases your Savings

If you are planning to buy your own home, under the Pradhan Mantri Awas Yojana (PMAY) scheme, remember that there are only a few months left for you to gather the amount for down payment, select a good builder, a desirable location, and also the home loan lender.

The recently introduced Credit Linked Subsidy Scheme (CLSS) for Middle Income Group (MIG) is applicable only for a period of one year starting 1.01.2017. Let's understand who all are eligible for the MIG category, who all can apply, how does the subsidy impact the loan amount and how much is the subsidy on home loan.

The middle-income earners

●       The MIG category further comprises of two slabs.

●       The Middle Income Group (MIG) - I include households having an annual income between Rs.6,00,001 up to Rs.12,00,000.

●       The Middle Income Group (MIG) - II includes households having an annual income between Rs.12, 00,001 up to Rs.18, 00,000.

  Cost

●       There is no processing charge for eligible housing loan amount as per the income criteria specified in the Scheme.

●       Lenders can charge the normal processing fee for additional loan amounts beyond the eligible loan amounts for interest subsidy.

The impact

●  The Prime minister awas yojana scheme for MIG buyers might not increase the demand for residential housing to a great extent.

●  The benefit of Rs 2.3 lakh/Rs 2.35 lakh probably won't be that appealing keeping in mind the cost of houses in the urban areas.

● There is a possibility that the government might consider doing away with the area restriction of 90/110 sq mt to increase the demand.

How is the subsidy adjusted?

●  The home loan interest rate subsidy will be credited directly to the loan account of the beneficiaries.

●   This would lead to decreased effective housing loan and home loan EMI.

Loans under PMAY

●  You can avail the Pradhan mantri awas yojana benefits if you wish to acquire a new house from the the builder and even for purchasing a house from the secondary market through repurchase.

●  One could also apply for a loan for the construction of the house. You can also apply home loans online.

●  If someone already owning a home wishes to avail pm awas yojana benefit, there's still a possibility.

●  The government has made it clear that the Mission (Housing for All by 2022) also offers enhancements/incremental housing to the existing 'pucca' house under the CLSS scheme component.

It is imperative to keep in mind that even if you are a first-time buyer it is wise to tread carefully and weigh all the options prior to venturing out to explore the affordable housing segment.