Thinking of buying your own home in Mumbai? Check your options carefully and search for some good offers on Home Loan.
Important Points About Home Loans in Mumbai
Home Loans are now easily available from many banks, NBFCs, and HFCs. However, before you apply for a loan, keep the following things in mind:
Your Loan Eligibility
Many factors affect your Home Loan eligibility, but the most important one is your income and the demands on it. Banks and NBFCs look at your income and your regular expenses, and any other EMIs you are currently paying. All these and other irregular expenses are subtracted from your net income. Lenders want your EMI to fall within 45 to 50% of your income, and they want to be sure you can spare that amount each month. Use loan eligibility calculators to find out the optimal amount you can borrow.
Beside this, lenders also look at your credit rating. This is a report prepared by credit rating agencies like CIBIL that collect and organise information on an individual’s credit handling habits. If you have a habit of clearing your loans on time, never borrow money unnecessarily, and pay bills on time, your credit rating and the score would be high. If you have a habit of running up debts and not repaying them, you will have a poor credit score. Lenders look for a CIBIL credit score of 750 and above when sanctioning loans.
Floating or Fixed?
Loans are given on floating or fixed interest rates. Shop around for the lowest Home Loan interest rates. Fixed interest loan rates don’t fluctuate as much as floating rates. However, in a falling interest rate scenario, floating interest rates are better as you can get the benefits of lower interest rates if market interest rates fall. Anyhow, fixed interest rates don’t stay fixed for the whole tenor, they can be revised by the lender periodically. Read loan clauses carefully. Also floating interest loans provide many advantages, like no foreclosure penalty.
Shop Around for Best Loan Rates
Never settle down for the first offer you get. Use loan aggregator websites to find the best offers for Home Loan in Mumbai. Look for low-interest rates, part-prepayment facilities and other features. Look for Home Loans with the lowest number of charges and penalties. Check if the lender has a good habit of passing on the benefits of reduced interest rates to existing customers too.
Never Choose a Long Tenor to Lower EMIs
If you cannot afford the EMI, look for loans with lower rates of interest, or apply with a co-borrower. If you extend the tenor, the interest rate goes up on the loan. So, your total interest paid on the loan also increases. Choose the highest amount you can afford as EMI, to keep the tenor short and the home loan interest low.
Increase the Down Payment
Save up funds before you buy a house. If you increase the margin of down payment percentage on the value of the house, you can bring down the loan amount. For instance, if the price of the house you are interested in buying is Rs. 30,00,000, try to pay anything between Rs. 6 lakhs to Rs. 12 lakhs as down payment. You will have to pay at least 20% of the cost anyway before your loan gets sanctioned. Increase this amount so that you borrow less and pay off the loan quickly.
Look for Penalty-Free Partial Prepayments and Foreclosure Facilities
Floating rate loans come without any foreclosure penalty, so if you save up funds, pay off the loan when the major portion of the EMI is still going towards interest payment. Many loans come with a clause to allow you to make a specific number of prepayments on the loan, apart from the EMI, to bring down the loan balance. Take advantage of this facility to make periodic prepayments on the loan and reduce the interest amount.
Read The Document Thoroughly, Including the Fine Print
Take the help of a legal counsel if needed. Read everything on the loan offer and loan agreement documents. There might be hidden charges like penalties for prepayments, a charge levied if the loan borrower is involved in a court case, or gets a divorce from co-borrower. If the property price reduces over the tenor of the loan, some lenders might demand additional collateral. Check all the clauses and penalties.
When Buying The Property
When you have chosen a house or apartment to buy, check for all the necessary documents. The seller of a house should have complete legal rights on the property. There should not be any encumbrances on the property.
In the case of a building project, check for all the proper land and construction plan approvals, compliance documents, approved road access, and good pathways in the project.
While computing the cost, take into account not just the apartment cost, but also the cost of common amenities, memberships, car parking, clubhouse access etc.
To make your home in Mumbai more affordable, look at properties in secondary areas, new residential regions, or areas where the per sq/ft cost is lower. Some of these regions in Mumbai are Ambernath West, Mumra, Umroli, Neral, and Virar East. Locate a good property that you can fit within your EMI budget, and apply for Home Loan.