The process of availing home loan can be complicated, but you can make this process easier and smooth by taking things step-by-step and you understand how to choose the right home loan.

Following are some helpful step by step tips to buy a home and availing an appropriate loan to finance your home:

Step 1: Finalize your property before the lender

You should always finalize the property you want to purchase before looking for lenders that would be ready to finance your house. This is important because some banks lend for a property that is already furnished while others extend for a self constructed property or property that is under construction. Thus it is better to finalize the category of your property first and then look for lender options. It will help us to focus in a defined area and extract all relevant information before finalizing on the lender.

Step 2: How much you can afford

Figure out how much you can afford. It can be evaluated by taking followings into consinderation:

Your income

Credit rating

Your monthly expenses

Down payment

The interest rate

The calculators can help, but it is best to visit a lender to find out for sure. A housing counselor can help you figure out how to manage and pay off your debt, and start saving for that down payment!

Step 3 - Ensure your loan eligibility criteria

All the banks follow some eligibility standards for giving a loan. Primarily, it depends on your income and repayment track records. You can get details of all bank home loan criteria from individual banks or in RealtyZing Home Loan Eligibility Calculator and choose the one that can offer you maximum amount based on your income. The loan eligibility amount can also be increased if you club your and spouse’s income.

Step 4: Research for a home loan

You can save money by doing your homework. Talk to several lenders, compare costs and interest rates, and negotiate to get a better deal. Consider getting pre-approved for a loan.

What is the best way to select the cheapest home loan?

Keep the loan period constant and calculate the total amount paid for the home through the different loan options available. You can use RealtyZing Smart EMI Calculator to caluclate you EMI.

What is a Fixed interest rate home loans?

Fixed interest rate means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, even if rates of interest drop in the market. Fixed interest rate home loans is generally 1-2% higher than the Floating interest rate home loans.

What is a floating rate?

This is the rate of interest that changes according to the market lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up..

Benefits of fixed rate home loans

The benefit of fixed rate home loans is that the borrowers have certainty of fixed repayment amounts even if interest rates rise. A fixed rate home loan is a better option for those who are good at budgeting and want a fixed monthly repayment schedule. Thus fixed rate home loan brings a sense of certainty and security.

Drawbacks of fixed rate home loans

The major drawback with fixed rate is that it is usually 1 - 2.5% more than the floating rate home loan. Another drawback is if the interest rate decreases, the fixed rate home loan borrowers dont get the benefit of reduced rates and the same amount has to be repaid every time. Another area of concern is whether the fixed rate home loan is 'truly fixed' or fixed for just few years. This has to be ascertained while taking the home loan. A 'fixed' home loan, which can be changed every few years will definitely wipe out the very spirit of such a loan. As per the experts, the fixed rate home loans are a better option if the economic scenario promises a rise in interest rates in near future.

Benefits of floating interest rate home loans

The biggest benefit with floating rate home loans is that mostly the floating interest rates are at least 1%-2% cheaper than fixed interest rates. Even if the floating rate goes over the fixed rate, it will be for some period of the loan not for the entire tenure. The interest rates will surely fall over a long period and thus floating interest rate may bring a lot of savings.

Drawbacks of floating interest rate home loan

The drawback with floating interest rate is the fluctuating nature of monthly installments. This makes it difficult to budget with floating interest rate home loans. As seen in recent times due to the hike in floating home loan interest rates, the borrowers had to shell out thousands per month extra as their EMI's, throwing their entire budget out of order.

Conclusion

When it comes choosing the interest rate regime, majority of home loan borrowers go for a floating interest rate home loan. Finally, it is up to the borrower to decide on what suits him the best. Ideally the borrower should compare home loans for various parameters and also by keeping the loan period constant and calculate the total amount paid for the home through the different loan options available. You can use realtyzing smart EMI Calculator to caluclate you EMI. We also provide you an option on our Home Loan Comparator to compare home loans in one go.