Buying a home is certainly one of the biggest investments of one’s life. This is because a home is one of the priceless possessions a man or woman has. Now, when it comes to buying a home, it is to note that buying a home is not an easy thing due to its high value or home loan processing fees. Not everyone has sufficient amounts of money to buy a home uprightly. Whether you are a businessman, a job person, or any other person, in most cases, you are likely to take a small business loan or home loan to fulfil your dream of owning a home.
If you are planning to get a home in 2022, you first need to determine your ability to buy a home by ascertaining the cost of a home you can afford to buy. The next thing to do is to do your own budget analysis as to how much you would be able to pay as a home loan EMI. Once you do this, you will end up with an analysis that would help you determine your worthiness for a home loan.
How to get a home loan?
Today, most public and private sector banks provide home loans to eligible candidates at highly attractive interest rates. You can consult the top brokers in India if he provides any kind of support in regard to the home loan. There are many non-banking financial institutions (NBFCs) that provide different types of home loans to prospective home buyers.
However, when it comes to applying for a home, the process tends to be complex and lengthy. You may need to submit a lot of documentation to apply for a home loan. Along with this, you need to have a clear understanding of all the applicable charges like:
- The budgeted EMI for a home loan
- Loan application charges
- Bank charges
- Applicable legal and processing charges
Having the knowledge of these charges would help you estimate the true cost of a home loan. You can even use different home loan calculators that can help you get the closest possible cost. This is because there are several other costs that incur other than loan interest rates.
Down Payment For Home Loan
No matter what’s worth of the home you are planning to buy, you would have to pay a certain %age of the amount as the down payment. In most cases, it hovers between 10 to 30%. However, the more amount you pay as the down payment, the lesser burden you are likely to face in the form of a reduced EMI, which means lesser interest rates.
For example, if you are willing to buy a property that has a total worth of let’s say 80 lakh, you would be able to get a home loan of around 60-70 lakh and the remaining amount would be paid as the down payment. You can check your banking partner for more clarity on the down payment part of the home loan. This comes under the purview of the LTV ratio (loan-to-value).
Just like the gold rate forecast, this percentage tends to differ from time to time and lender to lender. So, keep a check on the same while making a home loan application.
LTVs for home loans
The applicable rules are:
- As per SBI’s statement, the LTV for home loans of a value of 30 lakh can be up to 90%. This simply means you would be able to get a loan of 27 lakh and the remaining 3 lakh would be paid as the down payment.
- Similarly, home loans between 30 lakh and 75 lakh have an LTV of 80%. It means as a borrower, you can get up to 80% of the amount as the loan and the remaining amount would be paid as the down payment.
However, it is to note that the exact LTV for a loan depends on several factors that may affect the final price. So, do check with your lender about the same before signing the documents.
Home loan processing charges
The processing charges for a home loan are mandatory and vary from lender to lender. In some cases, lenders waive off these charges to lure home buyers.
Some lenders have a standard term for these charges, while others ask for a certain percentage of the home loan. In general, it hovers between 0.5 and 1 or 2% of the loan value. One example is SBI Home Loans, which charges 0.4% of the loan amount as the home loan processing charge. On the other hand, the loan processing charge for the HDFC Home loan is 0.5% of the total loan amount.
If you are looking for a home loan, do check the running offers as many lenders won’t hesitate from waiving these charges.
Apart from these primary home loan charges, there could be several other charges associated with a home loan. They are legal charges, administrative charges, switching charges (in the case of a home loan transfer from another bank), and late payment penalties. In most cases, banks and NBFCs provide a detailed list of the charges
Do keep in mind that banks and other lenders earn heavily by applying these charges in your home loan application. So, be wary of all the applicable charges before signing the loan documents. And, it is strongly advised to negotiate with your lender to avoid paying additional charges. Always remember that most banks and lenders will easily do the same.