With the loan tenor extending up to 30 years and in some cases, 40 years as well, home loans are generally a long-term commitment. It is therefore utmost importance that one tries their level best to look for affordable home loans. Affordable home loans are essentially low-interest-rate housing loans that are easy to pay due to economic EMIs. In this article, we share with you some simple tips that can help you avail yourself of an affordable home loan.
Affordable Home Loan Solutions: Tips that Will Help You Avail Yourself of an Affordable Home Loan
Make Sure You Meet the Housing Loan Eligibility Criteria
Every lender has strict housing loan eligibility criteria that a borrower must qualify for. Housing loan eligibility requirements revolve around age, income, credit score, etc. The housing loan eligibility criteria are a set of criteria that help lenders assess borrowers’ repayment capacity and therefore, the risk in doing business with them. Individuals who meet all the qualifying criteria can negotiate for better loan terms and conditions, including lower home loan interest rates, higher loan sanctions, and a home loan tenor that works best for the loan borrower.
Pay as High a Down Payment as Possible
For home loans, the LTV ratio can go as high as 90%. This is for homes priced under Rs.30 Lakh. For homes priced above Rs.75 Lakh, the LTV ratio cannot exceed 75%. When you opt for a low LTV ratio loan by paying a high down payment, you benefit in two ways. To start with, since these loans involve a low loan amount, the loan EMIs are affordable and easy to repay. This, in turn, reduces the chances of a loan default. Further, when lenders know that the risk is low for them, they also extend to borrowers low-interest rates and other better loan terms and conditions which make home repayment easy. So, to enjoy an affordable home loan, pay as high a down payment as possible.
Make Sure You Have an Excellent Credit Score
Your credit score will tell a lender everything they must know about you. Your credit score is the total of all your credit activities. It tells lenders how dependent you are on credit and how responsible you feel towards its repayment. Therefore, lenders always decide the terms and conditions of a loan after taking into consideration the loan applicant’s credit score and repayment capacity. To be eligible for a low home loan interest rate and an affordable home loan, a borrower must have a credit score in the range of 750 to 900.
Get Approved
Individuals looking to avail themselves of a home loan on the best possible loan terms and conditions must try and get pre-approved for a home loan. Lenders pre-approve individuals who have an excellent credit score, meet all the qualifying criteria and are in general seen as reliable borrowers by lenders. Pre-approved individuals find it much easier to get approved for a home loan on desirable terms and conditions, including low home loan interest rates.
Opt for a Home Loan Balance Transfer
If you think that your current lender is charging an exorbitantly high home loan interest rate, you can switch to an affordable home loan by opting for a home loan balance transfer. Home loan balance transfer is a facility using which borrowers can transfer the remaining balance on their loan to another lender willing to refinance the loan on better loan terms and conditions. In the case of a home loan balance transfer, your new lender will repay your current lender and that is when your loan account will be considered closed with them. You will now need to pay your home loan EMIs to your new lender instead of your old one.
Final Words
Home loans go on for years and they have a significant impact on how you live and spend money. Therefore, if you are planning to apply for a home loan, make sure to apply for a loan amount, keeping in mind your repayment capacity and creditworthiness. A home loan calculator can help you greatly in this regard. These calculators are easily available and free to use. So, make sure to use them to make the right decisions about your loan and avoid any sort of trouble at a later stage.
