Owning a home today is a basic necessity and a dream for every individual. This makes securing a home loan one of the most important personal finance decisions in the life of an individual. Today, home loan tenures vary from 10 to 30 years, depending upon the age of the borrower and the home loan amount. Consequently, home buyers are opting for home finance from banks and financial institutions. Hence, it is imperative from the borrower’s perspective to holistically analyse various aspects before you finalise the financial institution.

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Tenure
The home loan tenure is dependent on several factors such as borrower’s age, loan amount, income, job stability, rate of interest, past repayment record and credit history. Lenders recommend borrowers to opt for a tenure depending on their current income, expenditure or any future exigencies. In case of a longer tenure, the borrower can avail of a higher loan amount eligibility depending on his age and repayment abilities. In case you have additional cash flows, you can prepay or foreclose your loan. A longer tenure also enables a lower Equated Monthly Installment (EMI).

Legal and technical clearance
Once you avail home loan eligibility, a financial institution will initiate legal and technical scrutiny of the property. This is important not only from the financial institution perspective, but also from the perspective of the end user.

Special offers
The festive season is a good time for home loan applications, as many lenders offer competitive interest rates and processing fees waivers. It is also important to pay attention to all schemes/initiatives offered by the government and regulatory initiatives towards affordable housing. For instance, the Credit Linked Subsidy Scheme under Pradhan Mantri Awas Yojana allows first time home buyers to avail a credit subsidy up to Rs 2.67 lakh to build their dream home. Be aware of the various initiatives, products and services offered by lenders, which will ensure that you get the best financial arrangement.

Co-applicant
There are several advantages of opting for an earning co-applicant such as enhanced home loan eligibility, equal liability for loan repayments, segregation of EMIs, income tax exemption, etc. Both the applicant and co-applicant are eligible for income tax exemption.

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For first home buyers, having a woman as a co-applicant could also fetch concessional interest rates. It could be your mother, sister, wife, daughter, but they need to be first home buyers.

By: Harshil Mehta
(The writer is joint MD and CEO, DHFL)
Source: DNA Money