How to Choose the Right Type of Home Loan for Your Needs?

The demand for home loans has increased in recent years. Thus, banks and other housing finance companies now offer different types of mortgage loans to cater to changing and growing demands of buyers. For a more precise understanding, we can classify the home loan types based on purpose and interest rates.

• Types of home loans based on the purpose

• • Home loan for the purchase of a new home
  • Home loan for the construction of a house
  • Home loan for extension and improvement of the existing house
  • Balance transfer home loans
  • Home loans for NRIs

An individual can opt to apply for a particular home loan based on their need. However, the terms and conditions, eligibility criteria, and document checklist may differ for these types of mortgages. It is thus best to check the eligibility criteria before applying for a home loan.

• Types of home loans based on interest rate

  • Fixed-rate home loans:For these loans, the rate of interest on the home loan remains the same for the entire tenure. When the home loan interest rates are low, it is best to lock at these rates to prove advantageous in the longer run.
  • Floating rate home loans:

    Also known as adjustable-rate mortgage loans, the home loan interest rates may go up or down. Thus, if interest rates are low, the borrower will have to pay more whenever the interest goes up.

    Factors to Consider for Choosing the Right Type of Home Loans

    Consider the following aspects before applying for a home loan.

    • Rate of Interest

    The EMI consists of the principal amount and the interest rate. Selecting the correct type of home loan interest rate hence becomes prudent. Although, as mentioned earlier, floating and fixed interest rates differ and impact the interest payout differently, one should consider the market conditions (whether the rates are likely to increase or reduce) before making a decision.

    • Loan Amount

    The loan amount heavily impacts the borrower’s monthly instalments or EMIs. Thus, one must choose a loan amount depending on the repayment capacity. Moreover, with numerous players in the market, lenders might try to lure borrowers by providing attractive offers. Therefore, settling for a loan amount after using a home loan EMI calculator is advisable.

    • Charges

      Opting for a home loan for its low-interest rate may not always be wise. There are charges that banks, and other lenders impose on the borrower, including processing and prepayment charges. Processing charges are charged for processing the loan and other expenses incurred by the bank. In comparison, prepayment charges are not levied on floating-rate loans but may be imposed on fixed-rate home loans.

    • Portability

      Many banks and housing finance companies offer portability features where the borrower can switch the loan from one lender to another. This can become convenient for the borrower if they do not want to continue with the same bank/lender. However, before switching, one must consider the charges levied and other terms and conditions.

    • comparison

      One of the best ways to compare different home loans and offerings is to check the loan fact sheets by different lenders and financial institutions. This gives a broad understanding of the features, fee, period of the loan, amount to be repaid, etc. In the end, choosing from different options is important so that one’s individual needs can be met.

    Conclusion

    The home loan market is full of renowned lenders and institutions offering attractive offers for different types of mortgages or home loans. With extensively high competition, one must ensure a factor in the above aspects before buying. Also, choosing a credible and reputed lender provides ease in transactions and peace of mind. Discover a dream home with Piramal Revanta! Take an online tour and experience contemporary luxury living with state-of-the-art amenities.

    Disclaimer- This article is based on the information publicly available for general use as well as reference links mentioned herein. We do not claim any responsibility regarding the genuineness of the same. The information provided herein does not, and is not intended to, constitute legal advice; instead, it is for general informational purposes only. We expressly disclaim /disown any liability, which may arise due to any decision taken by any person/s basis the article hereof. Readers should obtain separate advice with respect to any particular information provided herein.

    • Buyer’s Guide
    • Home Loan
    Sources :

    • Bajaj Finserv
    • Bank Bazaar
    • Forbes
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