The ongoing extended festive season has been phenomenal for Indian home buyers. And when we buy a home, for most of us, a home loan requirement comes in by default. Therefore, here are some smart tips on choosing the right home loan and especially the lender.
There has been news of record home buying across major Indian cities during this extended festive season. And home loans play a major role in fulfilling the dreams of owning an abode for most of us. However, some people look at home loans as a 'necessary evil' that is lender agnostic and needs to be complied with. But this is where the difference lies in understanding the nuances of house financing. And as an expert, my advice has always been that home buying is a one-off process while a home loan is an iterative process over 10-30 years. Hence, your lender selection needs attention at par with home buying if not more.
Here are ten things you should keep in mind to select 'the one' lender for you -
Rate of interest
Beginning with the most important factor, compare all lenders on two or more aggregator websites to understand the range of interest rates in the market. 'Lowest is the best' may not always be the right choice. Instead, always shortlist the lowest three lenders to begin with. For new home buyers, also check if your builder has an Approved Project Financial (APF) with the shortlisted banks. It helps fast-track the post-sanction process.
Processing fee
This ranges from 0.5-1 percent of the loan amount. My advice is to always check for offers such as waivers and try to negotiate with your shortlisted lenders. You will not just save thousands of rupees. It will also give you a perspective on how the bank treats its customers.
Rate change response
Interest rates keep fluctuating, especially now when they are at a 10-year low and expected to reduce further. Check on your bank's response to passing on this change to borrowers and cost liabilities.
Turn-around time
Ask your developer/broker and friends/family on usual process timelines for your shortlisted banks. If your requirement is quicker disbursement, then this factor may make a difference.
Coverage
Knowing upfront of your bank's flexibility to cover all cases is important, especially if you are looking for a higher loan amount and have limited own contribution. Also, if you are an outlier profile (say limited credit history).
Service
Check on the bank's reputation on responsiveness, customer friendliness, and extending conveniences such as home visits.
Trust
Lenders' credibility is a key factor these days. In light of some cooperative banks going bankrupt due to Non-performing Assets (NPAs), you should ideally choose a large and stable lender.
Long-term service
A lot can change in a span of 10-30 years. You may want to pre-pay your loan earlier than expected or switch to another lender. While these are possible, it is always good to have a lender who enables this smoothly.
Hidden costs
Always ask your shortlisted banks upfront on possible hidden charges. Some lenders impose unexpected charges post-sanction, by which time you are in a hurry for the disbursement. Also, some banks force you to buy term insurance through them (insurance is mandatory, but the provider is your discretion). This may save you the hassle of last-minute expenses.
Digital savviness
As a believer in the power of technology, I believe this is a key point and will only grow in importance in the future. Always check how savvy your bank is with respect to online payments of Equated Monthly Instalments (EMIs), online loan processing, and so on. This factor keeps the loan process transparent, saves time across your tenure, and provides a digital record of all transactions.
All in all, choosing your lender is a balance between short and long-term realities. Always focus on getting the long-term pointers addressed whilst ensuring lower interest rates. Although this philosophy works for most, but feel free to choose your priorities. It is advisable to lock in on any three of the above 10 parameters as non-negotiable and ensure you get those from your lender. This way, you get to have a no-regret loan to complement the beautiful feeling of owning your dream home.
