For potential home buyers, choosing a home loan is an important step in their home buying journey. With so many banks and financial institutions on the market today, choosing the right lender is not an easy decision. Often, a borrower may be more inclined to choose a lender that offers the lowest interest rates.
However, other important factors need to be considered to ensure a comfortable loan repayment experience. Emphasizing this idea, experts in a webinar hosted by Housing.com asked, ‘How do lenders and your home loan defer?’
Has shared valuable insights to help individuals make an informed decision about choosing the best lender and home loan term. (See the webinar on our Facebook page.) Among the webinar panelists were Sanjay Graymail (Head of Business – Housing Finance and Emerging Market Mortgage, Kotak Mahindra Bank) and Rajang Snood (Head of Business – PropTiger.com). The session was moderated by Jumar Ghosh (Editor-in-Chief of Housing.com News) and a co-brand of Kotak Mahindra Bank.
Where can I get a home loan?
Talking about the importance of preparing for a home loan, Gharial said, “One of the key parameters is the credibility of a financial institution. A home loan may not be the only product a customer can ask for from a financial institution. It is important to see if the lending institution offers visibility to multiple products.
Subsequently, a customer can change the tenor and rate, choose a top-up plan on the existing loan or go for another loan from the same company. Therefore, when choosing a home loan, one should not only look at the interest rate of the home loan. ” Generally, a person may choose to get a home loan from a bank where he is already a customer. For such regular customers with a good track record, banks may also offer flexible options
for future rates. This could be a private bank, a public sector bank or any NBFC that an individual may consider for a home loan. In detail, one must see if the company is able to meet multiple needs of a customer in the long run, he added. Highlighting the long-term relationship between a home borrower and a lender, Rajang Stood said, “Buying a home is one of the biggest decisions a person makes in his life. One of the important decisions in this regard is to choose a lender for the home loan.
However, decisions about choosing a lender, especially for a housing loan and other financial products, may be made in the future, but not separately. ” First and foremost, another important consideration for borrowers is the amount of the loan for which one is eligible, as decided by the lending institution. There are other things to keep in mind when it comes to rapid change.
The transition to a digital experience on the home loan journey
Focusing on the digital preparedness of financial institutions and banks, especially in the current epidemic situation, Jhumur Ghosh said, “Home loan applicants do not want to go through a lot of paperwork and they want the process to be done smoothly.
Customers today are choosing banks that are digitally ready, which makes life easier for them to choose a home loan. ” Gharial agrees that banks are taking steps to make things easier for customers. He also highlights the emerging industry trends in home loan and secured loan support travel, where customers seek personalized assistance and face-to-face interactions with their lenders.
According to Stood, in the past, the preference of home buyers towards digital media has increased in three to four years. “As far as the pre-qualification process for loans is concerned, most customers prefer the online mode. Financial institutions are focusing on innovation around providing a digital experience for customers. About 50% of the overall home loan process is happening online.
If a financial institution can give a policy approval based on the information provided by the customers online, then the interest in closing the property transaction increases significantly. However, the overall home loan process cannot be done entirely digitally and customers prefer a helpful part of the process. He observed.
What do buyers like?
Typically, real estate developers contract with financial institutions to provide home loan solutions for their clients. Gharial notes that smart home buyers, who are digitally aware and have access to online information, prefer to discuss with developers about property rates when weighing their options on their lenders, who provide their best home loan options.
Agreeing that home buyers look at these aspects differently, Interest shared that many home buyers prefer this type of tie-up because it reduces their efforts to independently find a lending institution. Ghosh suggested that home buyers must keep their options open and make a decision after analyzing various situations.
Will you go for a short loan term or long term?
Although choosing the right lender is one aspect of the home loan journey that borrowers are facing, many are unable to determine the term of the ideal home loan. One must keep in mind that opting for a longer loan term helps one to repay the loan in the long run, EMIs are quite affordable. On the other hand, a shorter loan term will have a higher EMI.
According to experts, maturity is a key factor when choosing a home loan. Going for a relatively long term will help one to get a higher loan amount for the same salary. The panelists suggested that choosing a suitable home loan term usually depends on a person’s financial situation and needs.
Things to keep in mind when choosing a home loan
According to experts, many homeowners consider applying for a home loan an effective option because it offers a variety of tax benefits. Home loan recipients are eligible for a deduction for the principal payment and interest component and other tax benefits when taking a joint home loan.
Experts recommend keeping these points in mind when choosing a house loan. Sharing more insights about home loans, Gharial talks about how lenders view salaried and self-employed individuals differently when evaluating their eligibility. “About 75% of the home loan market is made up of salaried class customers and the remaining 25% belongs to the self-employment department.
It is easier for salaried people to reach qualification because they have a fixed income from their salary. Conversely, for self-employed, The organization must go through the ordeal of verifying the various sources of income and a few other aspects, thus taking a long processing time on the part of the lender. “
Fixed rate vs. floating rate
According to experts, certain banks and financial institutions offer a fixed rate for home loans for a certain period of time. However, this could mean a premium on conventional floating rates, which is not financially understandable for borrowers. On the other hand, the floating rate does not depend on the external environment but varies based on the RBI’s repo rate.
Under the current regime, experts believe that since home loans are linked to benchmarks set by the RBI, it should give consumers the confidence to choose floating interest rates. See also: all about target = “_ blank” rel = “nonpeer referrer”> fixed vs semi-fixed vs floating home loan.
Pre-approved loans: are they beneficial?
A pre-approved loan is where a lender approves a loan for a borrower before selecting a property. According to Grayly, pre-approved loans can be useful only for zeroing in on a property and knowing one’s eligibility for the amount of home loan.
Interest noted that pre-approved loans help potential house buyers because it creates a sense of confidence and makes them well acquainted with the entire house loan process. In response to how long low-interest rates can last, Gharial talks about the effects of retail inflation and house loan interest rates.
He said interest rates could rise and borrowers need to assess the situation and decide if it was the right time for them to take out a house loan. Interest points out that home loans are long-term investments and interest rates may fluctuate as they are linked to the RBI’s repo rate. However, he said that any change in interest rates on home loans would not significantly affect the potential buyer’s decision to buy a home.
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