Home loans, otherwise known as home equity loans are a type of public loan where the borrower uses the loan amount for purchasing or renovating his or her new home. Here the home acts as the collateral asset and hence the amount of loan to be sanctioned to the borrower depends upon the value of the property for which the loan is taken. Hence this article acts as a guide for the selection of the best of home loan finance and the proper loan sanctioning steps that one needs to follow.
How to choose the best home loans?
Choosing the wrong loan with property would act as a huge financial liability upon the borrower and would backlash him or her with great financial depression. Hence some pointers need to be considered before converging to a particular loan and hence selection of the proper home loan becomes important. Following are the pointers for the same: –
- Interest rate- This factor depends upon the loan amount, the past credit history of the borrower and the loan repayment time. It generally varies in between 9 to 12 percent. But the selection of the loans having lower interest rate is beneficial in terms of having lesser interest amounts during repayment and earning a more time bracket for the repayment. One must understand the rate-setting mechanism for the loans to gauge a better idea.
- LTV Ratio- Loan to Value ratio is the portion of the property value that will be financed by the institutions offering loan for the property purchase. The rest payment goes as down payment that needs to be paid out of the own pocket. Hence one needs to select the loan that offers a higher percentage of LTV ratio and lesser down payment from the own pocket.
- Credit history- Maintaining a good credit history and score is important to earn lesser interest rate loans and higher repayment bracket. However, these days’ banks do sanction loans even to bad scores and for that extensive documentation needs to be presented.
- Tenure- Selection of loans offering a larger tenure for repayment with reduced costs on EMI will be hugely helpful to get the best of the home loans.On an average, this tenure lasts for about 25 years and is subjected to increase as per the terms and conditions of the lending institute.
- Processing time and processing fee- Sometimes the processing time gets delayed to a major extent and thus creates problems for the borrowers. Hence institutions offering emergency loan services and much lower processing fee i.e. 0.50-1.50 percent of the sanctioned loan amount should be opted for to get the best options for a loan.