Owning a home is a dream for many and making it a reality requires a great deal of funding. If you are planning to buy a new home and are short of funds, opting for a reasonable home loan can be a viable option. As a first-time borrower, your initial step should be to scout for lenders with easy-to-meet home loan eligibility requirements.
Besides this, you should also look for features like property search services and a digital sanction letter, as these add value and convenience to your experience. Access to and use of tools like the home loan EMI calculator is also important when you are considering a home loan. This can help you plan the loan and your budget effectively, so that you can make timely repayment without feeling any financial pressure.
To ensure that you get the best home loan deal at the onset and can service it stress-free, take a look at these 5 strategies as a first-time borrower.
Maintain a high CIBIL score
A good credit score increases your home loan eligibility, so you can enjoy fast approval as well as suitable loan terms, be it with regards to the interest rate, loan amount or tenor. So, ensure you check it and maintain it at 750 or higher, as this score positions you are a reliable borrower in the eyes of lenders. If you don’t have a high CIBIL score, see if you can pay off existing loans, increase your credit card limit to decrease your credit utilisation ratio, and check your credit report to see if any errors there are bringing your score down. Timely repayment of credit and experience with a mix of credit facilities usually helps you enjoy a high score.
Take a home loan with a co-applicant
Opting for a joint home loan has multiple advantages. For one, you increase your home loan eligibility with a co-applicant who has a good CIBIL score and income as lenders view the responsibility of repayment spread over two borrowers instead of one. Secondly, a joint home loan allows both applicants to enjoy tax benefits. Thirdly, women applicants are likely to get loans at a lower or discounted home loan interest rate, so choosing your wife, mother or sister as a co-applicant also helps make the loan more affordable. Some states also offer stamp duty exemptions for properties who list a sole female owner or a female joint owner.
Try for a higher down payment
With lenders offering a high Loan-to-value (LTV) ratio up to 90% on home loans, you may be excited about getting a high loan amount to finance your home purchase. However, be aware that a high loan amount will lead to bigger EMIs and may also force you to choose a higher tenor. This means, you will end up paying more interest in the long run. So, it is always safe to pay a larger sum as your down payment and decrease your LTV. This will bring down your EMIs and help you reduce the duration of repayment too. All in all, this helps you decrease the cost of borrowing and pay off your debts quickly while increasing your home loan eligibility too. This also helps you get a more competitive home loan interest rate.
Plan your part-prepayment right at the start
Part pre-payments refer to the amount you pay towards your loan in addition to your EMIs. This amount goes towards reducing your principal. On making a part payment like this, you can either reduce your loan tenor or subsequent EMIs, which helps you become debt-free faster. You can make pre-payments with the surplus funds you gain from investments or from other sources of income. Strategize your prepayments even before you borrow a home loan using the home loan EMI calculator, as the amortisation schedule that some digital calculator offer help you see when making prepayments is most beneficial. This is usually in the first half of the tenor when the interest component of your EMIs is higher than the principal. Doing this will ensure that you save money, which you would have otherwise paid towards interest.
Check interest rates and other charges of lenders
Do you spending hours researching and reading reviews before buying a smartphone or a car? Apply the same principle while choosing your home loan and lender. Read not only about the current home loan interest rate, but also about the additional charges applied to a home loan by lenders. This will help you choose the right deal. Also check if you are eligible for a pre-approved home loan offer that simplifies borrowing, which is given by some housing finance companies who have already assessed your home loan eligibility. This make application for a home easier and quicker. Lastly, also check the home loan balance transfer process so you can refinance your loan in the future, if needed, to switch to a lender who offers a lower interest rate. All this helps you borrow more confidently and in a more informed manner.
Now that you are aware of the strategies that can help you borrow more effectively, consider Bajaj Housing Finance Limited Home Loan. It has a flexible tenor of up to 30 years, comes with affordable home loan interest rates and offers ample finance with benefits such as a top-up loan. With quick processing and minimal documentation, it is one of the preferred housing loans. Apply online to get started today and realise your dream of becoming a homeowner.