Home Loan

Depending on the type of housing loan you apply for, you will have to pay various charges, including:

1. Processing fee : This is one of the essential home loan fees to be paid to the bank by the borrower after the approval of the loan application. It is a one-time non-refundable fee. The processing fee will become up to 1% of the loan amount

2. Prepayment charges : If you decide to repay the home loan amount before the loan tenure ends, you will have to pay a prepayment penalty.

3. Conversion fee : A conversion fee is charged when you decide to convert to a different loan scheme for the purpose of reducing the interest rate attached to your current loan scheme.

4. Home insurance : It is vital to have an ongoing insurance policy throughout the housing loan tenure. You need to pay the premium for the insurance plan directly to the company offering the service.

5. Cheque dishonour charges : If a cheque you issue to pay the home loan EMI is dishonoured due to insufficient account balance or any other reason, cheque dishonour charges are levied.

6. Default charges : If you fail to pay your EMIs on time, you will be charged home loan fees as a penalty for delayed payments.

7. Change in loan term : You may have to pay nominal charges if you decide to change your loan tenure.

Home loans are provided for a variety of purposes apart from buying a house. Let’s take a look at some of the popular types of home loans.

1. New Home Loans: These loans are provided to those who want to purchase a property or house for the first time. Borrowers must fulfil the criteria to be eligible to avail of the home loan.

2. Pre-approved Home Loans: These loans are offered after assessing the borrower’s creditworthiness, financial position, and income. If these factors meet the eligibility criteria, an in-principal approval of the loan is sent.

3. Home Purchase Loans: These loans are given especially to borrowers who wish to purchase a flat or house.

4. Home Loans for Construction: If an individual wants to construct a house on an existing piece of land, this type of loan is suitable.

5. Home Loans for Renovation: A home loan for renovation is offered to homeowners who wish to renovate, uplift or extend their existing house.

6. Plot Loans: These loans are suitable for customers interested in purchasing a plot or piece of land for constructing a house.

7. Home Loan Top-Up: As the name suggests, a home loan top-up allows customers to borrow an additional sum of money over the existing home loan.

8. Balance Transfer Home Loan: The balance transfer facility permits borrowers to shift their home loans from one bank to the other for lower interest rates.

If your home loan application is rejected, you can re-apply for the home loan. But you must consider the following aspects before you proceed:

• Credit score : Your credit score is a vital determinant of your capacity to repay a loan. Housing loans are long-term loans. Therefore, your repayment capacity is evaluated to determine the approval or rejection of a home loan.
  A poor credit score increases the chances of your home loan application getting rejected. Remember to take a look at your credit report and credit score before you apply for a home loan. A poor credit score can be improved upon by making debt repayments on time.
• Loan Amount : Some borrowers apply for a loan amount that is way beyond their eligibility. Banks fix a maximum loan amount based on your present monthly income. If your home loan is rejected because the loan amount you applied for exceeds your eligible loan amount, you can re-apply after reducing the loan amount.
• Other Ongoing Loans : Your loan application can also get rejected if you are already repaying some ongoing loans. To get loan approval, you must not be paying more than 50% of your monthly income towards loan repayments.
  Having many loans will have a detrimental effect on your personal finances and also your repayment capacity. Thus, you should clear any ongoing loans before applying for a housing loan.

A home loan balance transfer helps you avail of lower home loan interest rates. As the interest rate reduces, borrowers can pay lower EMIs, which can increase interest savings significantly. If you are paying a higher interest rate than the current market standard, you can choose to transfer a home loan and enjoy a reduced interest rate.

Benefits of Home Loan Balance Transfer

• Hassle-free processing : Transferring a home loan is hassle-free. The eligibility criteria of the process are simple and require minimal documentation.
• Customised repayment options : Applicants can enjoy tailored repayment options to keep the housing loan affordable. With a lower interest rate, borrowers can either choose to enjoy lower EMIs or a shorter tenure.
• Affordable interest rates : With the home loan balance transfer facility, you can get your existing home loan refinanced at lower home loan interest rates. A lower interest rate means lower EMIs and more monthly savings.
• Alter the home loan tenure : When you transfer a home loan, you can choose to restructure loan terms and change the home loan tenure or the repayment period as per your financial capabilities.
• Top-up loan : A home loan balance transfer comes with the benefit of a sizeable top-up loan that offers a relatively lower interest rate compared to personal loans.

To increase your chances of getting a housing loan approved, here’s what you can do.

1. Credit clean-up : Your credit score is a vital factor of consideration. A high credit score makes it easier for you to get a loan. If you have a low credit score, identify the reasons by checking your credit report. Sometimes, minor errors affect your credit score adversely. In such a case, inform Credit Information Bureau (India) Limited (CIBIL) immediately about the error.

2. Assess your debt-to-income ratio : Lenders analyse your current income to determine your ability to pay the home loan EMIs. If possible, you can try to increase your annual income through a part-time job or by selling liquid assets like stocks. As your debt-to-income ratio increases, your chances of getting a loan can also increase.

3. Limit your borrowing : If you borrow more money than you need to meet your financial targets, your chances of getting a housing loan are reduced. Save and invest more, and take wise calls on how much money you require as a loan and submit an application for that particular amount.

4. Add a co-signor or guarantor : In certain cases, it can be difficult to get a loan on your own accord. Consider adding a co-signor or guarantor with a good credit score. A co-signor or guarantor ensures that you pay your home loan EMIs on time, and if you fail to do so, they are liable to repay the loan on your behalf. However, getting a co-signor or guarantor comes with its own terms and conditions and so be sure to take note of the same.