What is a home loan?
Home loans, or home equity loans, are a type of public loan where the borrower uses the loan amount to purchase or renovate their new home. Here, the home acts as the collateral asset, and hence, the loan amount to be sanctioned to the borrower depends upon the value of the property for which the loan is taken. These loans are generally used for the majority of expenses like home purchases, home repairs, home renovations, and so on. Property websites like METProperty.com have various options for home loan.
Usually coming in two types, i.e., closed and open ends, these types of loans require a person to have a good history in order to get sanctioned the best of the loans available during that time. Hence, informational websites like BSN (Bright Side of News) guides the selection of the best home loans and the proper loan-sanctioning steps that one needs to follow.
How do I choose the best home loans?
Choosing the wrong home loan would act as a huge financial liability for the borrower and would backlash him or her with great financial depression. Following are the pointers for the same:
- Interest rate: This factor depends upon the loan amount, the borrower’s past credit history, money lenders near me and the loan repayment time. It generally varies between 9 and 12 percent. However, selecting loans with a lower interest rate is beneficial in terms of having lesser interest amounts during repayment and earning a longer repayment time. One must understand the loan rate-setting mechanism to get a better idea.
- LTV Ratio: The loan-to-value ratio is the portion of the property value financed by the institutions offering loans for the property purchase. The rest of the payment goes as a down payment that must be made out of one’s pocket. Hence, one needs to select the loan that offers a higher percentage of the LTV ratio and a lower down payment from their own pocket.
- Credit history: Maintaining a good credit history and score is important to earning lower interest rates on loans and a higher repayment bracket. However, nowadays, banks sanction loans even for bad scores, and for that, extensive documentation needs to be presented.
- Tenure: Selecting loans offering a longer repayment tenure with reduced EMI costs will be hugely helpful in getting the most out of home loans. On average, this tenure lasts about 25 years and is subject to increase as per the lending institute’s terms and conditions.
- Processing time and processing fee: Sometimes, the processing time gets delayed to a major extent, creating problems for the borrowers. Hence, institutions offering emergency loan services and a much lower processing fee, i.e., 0.50–1.50 percent of the sanctioned loan amount, should be opted for to get the best loan options.
Steps to get the best home loans
The following steps need to be followed to get sanctioned for the home loan using the easiest and most convenient method: –
- Keeping a good record of your income and other parameters to know the amount of loan you are capable of
- Knowing in advance about the loan steps of the bank and, hence, getting prepared accordingly
- Keeping the required documents ready
- Reading the terms and conditions of the loan before signing the deal
- Choosing the proper EMI method
- Taking the necessary steps for home protection schemes
Hence, some points need to be considered before deciding on a particular loan, and the selection of the proper home loan becomes important.
