A home loan is one of the best financial products that helps you buy your dream home with tax advantages. Before applying for a home loan, you must pay a certain amount out of pocket, also known as a down payment. It can represent between 10% and 20% of the total cost of the property. After paying the deposit, you can get the rest of the amount as a home loan from the financial institutions and this amount is repaid over a fixed period according to your loan agreement.
Applying for a home loan is very easy, but whether or not you receive the funds depends on your eligibility, credit score, and income. Lenders assess your ability to repay by reviewing your credit history to avoid defaulting in the future. A home loan is a secured loan where your property is used as collateral, and if you do not repay the principal amount plus interest, the lender can foreclose on your property.
You can apply for a home loan in branch or through a respective online portal of the financial institution by submitting your documents. If your credit score, income, and other eligibility criteria are met, the financial institution will disburse your home loan within days to weeks. Depending on your home loan, you may be able to claim tax benefits under Section 80C, 80EE, and Section 24.
Before applying for a home loan, you should know the interest rate, tenure, and other terms and conditions to avoid any ambiguity later. A home loan is a long-term financial commitment; you need to know how many IMEs you can afford to pay monthly without disturbing your other responsibilities and requirements. A simple rule is that your EMI must not exceed 40% of your take home pay. If you lack funds to buy a house, you can always take out a solidarity mortgage to increase the amount. However, always pay attention to how much you can pay as an EMI without having financial problems.
You can apply for a home loan from the bank you already have a relationship with, or if you have attractive interest rates and other benefits, you can go to other lenders. It is important to compare interest rates, processing fees and other terms and conditions before signing a loan agreement.
You should also check loan foreclosure fees (if any), processing fees and other hidden charges to avoid confusion later. The lower the interest rates, the lower your EMI and the total interest payable on your loan. You can check your EMI liability for a certain home loan amount by asking for different interest rates and terms. This will help you know in advance how much your monthly loan repayment will be, according to Bankbazaar.
Besides, you should also check the location of the property, approvals and other specifications like upcoming infrastructure and property outlook before paying the reservation amount. The property must be legal and must have all government approvals so that you don’t get in trouble when you have already started repaying the loan.
Below are more than 30 financial institutions offering the cheapest interest rates on home loans. You can compare interest rates and check provisional EMIs for a loan of Rs 75 lakh for 20 years.
Interest rate and EMI on home loan
Compiled by BankBazaar.com
Note: The lowest interest rates on home loans for all public and private listed banks (ESB) and HFCs listed on the NHB website that offer home loans up to Rs 75 Lac are taken into account for compiling data; Banks/HFCs whose data is not available on their website are not included. Data collected from respective bank/HFC website as of May 26, 2022. Banks and HFCs in their respective sections are listed in ascending order based on interest rate, i.e. bank /HFC offering the lowest interest rate on the home loan is placed at the top and the highest at the bottom. The EMI is calculated on the basis of the interest rate mentioned in the table for a Rs 75 Lac loan with a term of 20 years (processing fees and other charges are assumed to be zero for the calculation of the EMI) .