to Choose a Home Loan
The cut-throat competition in the housing
finance market has ensured that lending institutions come up with
a wide array of products to woo the potential customers. In such a
scenario, prospective buyers need to adopt a prudent approach and
evaluate the options available in the market before choosing a
particular home loan.
First and foremost, the affordability factor has to be taken into
account. As the investment in a home does not yield any monthly
income, the ability to repay the loan depends entirely on salary
or regular income from a stable business. Most finance companies
finance upto a maximum of 85% of the cost of the house and monthly
repayments are usually less than 35-50% of the customer's gross
Choosing the lending institution is another vital step. It is
imperative to choose the financer with utmost care and proper
consideration of its past track record. Apart from the housing
finance companies, most of the major nationalized banks have
forayed into the home loan segment.
Another important consideration in choosing home loans is the tax
bracket as housing loans are one of the best ways to avail tax
benefits. The tax breaks are directly related to the level of
interest and principal repayments made each year, with an over all
upper limit. One may not qualify for the full tax break if one's
loan is relatively small.
Interest rate is undoubtedly one of the most important parameters
to factor into one's calculations. In fixed interest rates, the
rate of interest remains unchanged for the entire duration of the
loan while in floating rates, interest rates change every time the
interest rate in the financial system change.