A Quick Guide for First-Time Home Buyers

If you’re a first-time home buyer with an annual income ranging up to Rs.18 lakhs, know that the Pradhan Mantri Awas Yojana (PMAY) scheme grants you access to a credit-linked subsidy going up to Rs.2.67 lakhs on loan interest. The current market is largely in your favour with lenders giving home loans at just 6.99% and reputed builders offering discounts. So essentially, your property cost and EMIs will be low.  

So if you’re ready to take that big leap and buy a house, here are some home loan tips that will help you choose a good loan product. 

1) Choose Wisely Between a Bank or Non-Banking Housing Company (NBHC) 

NBFC rates are not influenced by external benchmarks like the RBI repo rate and they can set their rates based on their cost of funds. It’s important to note that public sector banks may offer the lowest rates but their processing and disbursal of loan amount takes time. Therefore, make sure to research and compare every aspect, offering and the scope of saving before you decide on which lender to go with. 

2) Know what the Bank’s Rate is Composed of 

Bank’s Rate = Repo Rate Linked Lending Rate (RLLR) + Spread 

Every bank has to link to an external benchmark according to RBI directives, and most bank rates are linked to the repo rate. This means that if the RLLR drops, your interest rate should effectively drop as well. The bank, however, decides the “margin” or “spread” charge, depending on a number of factors such as your down payment amount, credit score, loan amount, profession and age. 

But how do you know which loan products are best for your specific profile? Talk to a Fincity expert and understand the loan products that are sure to offer you maximum savings.

3) Try putting in maximum down payment

More the down payment, lesser the Loan-to-value (LTV) ratio or the proportion of the cost you would have to borrow. This is one of the key factors considered by lenders while deciding your loan interest rate. If your down payment is high, in all likelihood, you would get a good rate and enjoy lower EMIs. 

4) Draft a Prepayment Plan 

It’s advisable to put a savings plan in place to make way for lump-sum prepayments towards your loan. This will substantially bring down your total interest cost. Go for a lender that does not charge a penalty for prepayment.  

Now, there’s no denying that finding a good home loan is not easy – the slew of options often makes it harder to decide on the right one for you. If you’re currently in this situation and feel overwhelmed with the endless number of choices, reach out to a Fincity expert at abc@fincity.com and have them simplify the task – and find you your home loan matches in minutes. We find you the best rate home loans that stay low over the life of the loan and our assistance is absolutely free! 

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