How to choose the best housing loan
We present a checklist of the factors to watch out for when you scout for the best home loan.
Buying a house is a process comprising equal parts joy and stress. On the one hand, you are on your way to becoming the proud owner of a splendid home. On the other hand, you dread the many rounds you must make of housing finance companies and understand the somewhat tedious loan application process. You are also worried that you might end up with a mediocre loan product.
Don’t worry – it’s not that difficult to find the best housing loan if you look for specific factors that define the best products. We’ve listed these factors below, so that you may better understand the crucial components of the housing loan and eventually find the best one:
- The interest rate.
The interest being charged by the housing finance company determines the loan’s overall affordability. It also determines how much money you repay to the lender at the end of the loan’s tenure. The lower the interest rate, the more affordable the loan is. Post-demonetisation in November 2016, major banks and financial institutions dropped their home loan interest rates by about 1% or slightly more. Today, SBI Bank charges interest at 8.5% while other major players like Axis Bank, HDFC Bank and Punjab National Bank Housing Finance Limited (PNBHFL) offer interest starting from 8.6% (floating rate). PNBHFL also offers a low 8.5% fixed interest on home loans.
- The documentation process
The documentation required is generally uniform across housing finance companies. What differs is the mode of submission (whether online uploading of documents is allowed), speed of evaluation and approval, and whether the lender gives time to correct any errors in the documents. You can access the lender’s website for a full list of required documents so that you don’t miss out on any. It is a good idea to opt for lenders who allow online application and submission to save time and money.
- The schedule of charges and fees
The housing finance company will charge legal evaluation fees, site visit fees, agreement preparation fees, fees to register the loan agreement, processing fees for the application, and at least two pre-EMI cheques (before the EMIs are automatically debited from your bank account). Make a list of all these charges and compare them against those of other lenders you have approached. If you share a good relationship with the lender, you can ask them to reduce or waive off certain fees to save money.
- If the loan can be transferred
You might decide to transfer the loan to another lender at a later date. The home loan can be transferred to another lender to take advantage of a lower interest rate. But your current lender must allow and facilitate this transfer. If the financial institution you are considering partnering with does not allow such a transfer, you must reconsider your decision to sign up with them.
- The loan disbursement process
Many housing finance companies promise to have the loan monies disbursed to you at ‘the earliest’ but the final approval and disbursement comes only after a month. This is hardly ideal in case you wish to finish the process quickly. It is a better idea to take a pre-approved loan which is valid for six months by the time you finish finalising a property. Meanwhile, look for lending institutions that have a proven track record of disbursing the loan monies early, such as PNBHFL. In fact, PNBHFL also offers an instant loan in just three minutes.