The most crucial thing to be kept in mind before applying for a home loan is the rate of interest. It not only affects your monthly EMI, but also the affordability of that loan going forward. Interest rates of home loans vary, depending upon the financial institutions, loan terms, your financial profile and other factors, including market conditions. Let’s learn more about home loan interest rate, EMI, eligibility, and schemes in detail:
Understanding Home Loan Interest Rates in India
A home loan is money that you borrow to purchase or construct a home and the home loan interest rate is the ‘cost’ that you pay to the company for borrowing that money. Even minor changes in the rate of interest impact how much you will pay each month (EMI).
Let’s consider an example: If you are availing a ₹30 lakh loan on 9% interest rate for 20 years, you will be paying approximately ₹26,992 as EMI per month. But if the interest rate is increased to 10%, your EMI will be around ₹28,951.
While ₹2,000 seems small, it builds up to a considerable sum over the duration of the tenure. For example, if the interest is 9%, the total interest would be ₹34,78,027, and if it’s 10%, the total interest would be ₹39,48,156, a difference of more than ₹4,00,000.
As you would notice, knowing your interest rate is an indication of your monthly installment and whether you can pay for the home loan or not. That is why it is imperative that you check home loan interest rates prior to application.
Eligibility for Home Loans
Typically, the principal requirements for qualifying for home loans are:
● Age – The age of the borrower should be between 21 to 70 years at the time of loan maturity.
● Income stability: Stable salaried or business income demonstrates better repayment potential, enhancing your eligibility.
● Property ownership: The property should have clear legal ownership and meet the lender’s valuation standards.
● Credit history: To be eligible, a credit score of 700 or above is considered good. Depending on the lender, you may qualify if you have a lower score, but the terms & conditions of the loan may change. Some financial institutions, like PNB Housing Finance have a minimum credit score requirement of 611, making the loan more accessible.
Home Loan Schemes in India
There are various home loan schemes that have been developed and designed for particular purposes. Here are popular home loan schemes offered by leading financial institutions across India:
● Home Purchase Loan: To buy a residential property whether new or under development.
● Home Extension Loan: For extending or enhancing an existing property. For example, when you want to add new rooms or floors.
● Home Construction Loan: For building your dream home.
● Home Improvement Loan: For renovations, repairs, or just adding anything else to an existing property.
While choosing the financial institutions, go for those that offer competitive rates of interest, easy eligibility criteria, clear documentation, and flexible plans, such as PNB Housing. Doing this will help make your loan application and its repayment easier and manageable. With a well-planned home loan, you will be able to buy your dream, while being financially comfortable and stress-free.