One can finally realize their long-held dream of owning property by taking out a home loan, which also offers dual tax benefits under sections 80C and 24b.
That’s not all, either. Furthermore, any mistake or bad decision-making may have long-term financial repercussions for the borrower because the majority of home loans involve larger loan amounts and longer Bank of India Home Loan terms. So before submitting a mortgage application, potential borrowers should carefully consider the five essential parameters outlined below.
Which interest rate—fixed, hybrid, or floating—is best for you?
The borrower must select between fixed, hybrid, and flexible home loan interest rates when applying for a mortgage. Regardless of the state of the market, the fixed interest rate will not change for the term of the loan. Also keep in mind that not all lenders offer fixed rates for the whole term of the loan; some just do so for a portion of the loan.
The marginal cost of lending rate (MCLR), like that of Bank of India MCLR, which is influenced by the RBI repo rate, determines the interest rates for flexible house loans. Banks must adjust their MCLR or RLLR to reflect rate changes because the RBI evaluates the repo rate on a regular basis.
If the borrower chooses a fixed monthly payment that won’t change in response to market conditions, a fixed rate Bank of India Home Loan can be a possibility. The borrower would forfeit the advantages of lower EMIs and would be forced to continue repaying the loan at the fixed rate if future house loan interest rates declined. Hybrid rate loans, which have two rates: an initial fixed rate and a continuous variable rate, are only offered by a small number of lenders.
Even while an increase in the Bank of India MCLR or repo linked loan rate may cause the existing interest rate to increase on the reset date, this increase can be offset by making a full prepayment on the loan or selecting a home loan balance transfer with a floating rate.
Remember that the borrower may switch from a floating to a fixed rate while servicing the mortgage based on your eligibility for a home loan; nevertheless, the lender may charge changeover fees.
Should you pick a shorter or longer Bank of India Home Loan repayment period?
The length of the loan, the amount of the loan, and the interest rate you select will all have a big impact on your mortgage payment each month.
Therefore, it’s crucial to choose your loan term carefully. Given that home loans may have massive loan amounts, a shorter term would result in higher EMIs, which could be too expensive for your monthly budget and leave you with less room for liquidity.
It is still advised to choose a longer term even if you can afford higher monthly payments to meet the requirements for a home loan because doing so will increase your financial liquidity each month and allow you to invest the additional funds over the course of about 7 to 10 years (ideally in mutual fund SIPs) before prepaying or closing the home loan once you have accumulated the necessary corpus.
Since you can prevent overextending your typical long tenure—which can run as long as 30 years—by prepaying/closing it in roughly 10-15 years, having a long tenure offers you not one, but two advantages. A lower EMI cost comes first.
Which options and repayment plans, while repaying a Bank of India Home Loan, are most advantageous to you?
Due to the intense competition created by the abundance of lenders, who are now providing mortgages at competitive rates (whether based on Bank of India MCLR or repo rate or any other external benchmark) after determining the borrower’s eligibility, home buyers have profited from the situation. In an effort to attract consumers by reducing the application process as much as possible, lenders are developing new home loan kinds, as well as new modes and repayment options.
Alternative repayment choices, step-up or step-down EMIs, and brief pauses (moratoria) lasting up to three months are a few of them.
In addition to these options for repayment, the borrower must pick an appropriate EMI payment schedule. Most financial institutions, including those that offer mortgage loans, also give their customers a variety of repayment options. These include standing orders, electronic clearing services, and post-dated checks (PDCs), which allow EMIs to be automatically deducted each month. ECS is popular and frequently required since it is simple, quick, and prone to error. The checks don’t need to be altered if the EMI changes in the future.
How can you choose the ideal lender?
Choosing the right lender is crucial when completing an application for a home loan based on your eligibility. Remember to take into account factors more than only the interest rate being offered while assessing the acceptability of different lenders, such as the necessary Bank of India Home Loan amount, length, various charges and fees, and the lender’s eligibility requirements.
Since these platforms provide a variety of online resources, including calculators for loan eligibility and EMI amounts, and because they help match each borrower with the best lender, borrowers can utilize them to select the best lender for their home loan.
Are you putting up all of your effort to secure the finest mortgage?
All of the aforementioned factors must be taken into account in order to secure the ideal home loan arrangement that doesn’t adversely affect your financial situation and enables hassle-free payments. Home loans usually have 15–30 year payback periods and large loan amounts. Because even a slight change in an interest rate can have a large influence on the total amount of interest paid, it is important to carefully analyze all mortgage-related factors. Your credit score, employment history, income, the size of the loan, and other factors that affect your ability to get a mortgage all have an impact on interest rates.
This could assist you in obtaining the best mortgage offer that meets your requirements and has the lowest interest rate. Be sure to pay off your house loan early if you have additional money over the term. This would assist in further lowering the overall interest expense.