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Availing a home loan? Here are some mistakes you should avoid at all cost

Repayment tenures going as high as 30 years clubbed with big-ticket loan amounts in situations of home loans require long term commitments from their borrowers. Any wrong step or decision taken by the applicant can reduce their chances of availing optimum loan, which further negatively impacts their future repayments. Being a home loan applicant, you should know that taking up a home loan is an important financial decision in one’s life as it includes a long term financial commitment from the borrower’s end. Presently, the interest rate of home loans is available at as low as 6.70% p.a. Owing to the availability of low Tata Capital Home Loan Interest Rates and other home loan lender’s interest rate often forms the delusion that buying a home is affordable and within reach through such HFCs and banks.

However, you need to understand that taking up a home loan just because it is available at a lower rate of interest might be a huge misstep, which holds the chances of sweeping you into massive financial trouble. Taking up a home loan with zero research or inspection is for sure not the best way of indulging in such a long term financial commitment. Being an applicant for a home loan, you need to ensure that you hold the potential of paying back the home loan EMI by the due date without impacting your long term financial health much.

As today home loans can also be taken through HFCs such as Tata Capital, LIC Housing, Reliance Home Finance, PNB Housing etc., which comes with less strict evaluation procedure unlike banks such as Federal Bank of India, State Bank of India, Punjab National Bank, Union Bank of India, Bank of India, Punjab and Sind Bank etc., many of the home loan applicants commit the misstep of choosing home loan without considering few of the most important parameters.

For instance, many opt for a Tata Capital Home Loan without checking the existing Tata capital home loan interest rate, processing fees, other charges and crucial terms and conditions. Doing so may actually propel you into a dangerous debt trap. Here are some of the important missteps that home loan applicants should avoid securing their approval chances and their financial health. 

Not accumulating adequate corpus for the home loan down payment or margin contribution.

As per the guidelines set by RBI, lenders such as Tata Capital, Axis Bank, Federal Bank of India, ICICI Bank etc., can finance just up to 75 % to 90 % of the home’s value basis of the loan amount. The ultimately granted loan proportion is generally decided by the lenders on the basis of their credit risk evaluation of the applicants. The remaining amount is required to be funded by the applicant himself from his own pocket in the form of a down payment amount or margin contribution amount. Thus, home loan applicants should first try to gather nearly 10 % to 25 % of the home’s value for ensuring their financial preparedness before submitting their application with any bank or HFC. 

As contributing higher down payment amount or margin amount reduces the lender’s credit risk for a home loan, those applicants that make a higher down payment or margin contribution have higher home loan approval chances at usually lower Tata Capital home loan interest rate or lower interest rate in general in case of other lenders. Thus, if you are one of those wanting to lower your entire interest cost, then you should aim to build bigger corpora so that you can contribute towards your home loan as a down payment amount. However, at the time of building your corpus, make sure to avoid sacrificing your investment corpora that are particularly meant for achieving your crucial financial goals as well as your emergency fund. Otherwise, the emergence of any financial emergency or crucial financial goal maturity might propel you to avail expensive loans. 

Not checking your credit report before making your final home loan application.

A credit score is a vital factor considered by the lenders when assessing the home loan applicant’s credibility. Home loan applicants having a score of 750 and above have higher home loan approval chances at considerably lower Tata Capital home loan interest rate or interest rate offered by other lenders. Thus, those applicants wanting to apply for a home loan through banks or HFCs should consider fetching their credit reports at least 6 months before submitting the home loan application. Doing this would provide those with adequate time having lower scores of less than 750 to take the required measures to improve their score. 

Not comparing amongst multiple home loan offers.

Interest rate, home loan repayment tenure, processing fees, loan amount and LTV ratio provided by the lenders can vary widely based on the applicant’s credit profile. Thus, the applicants of home loans should compare all the home loan offers available to them before submitting the final loan application. Applicants should start by initially approaching the financial institutions with whom they have an existing relationship in the form of current, savings, fixed deposit etc. Then consider visiting the online financial marketplaces for striking comparison among the interest rates and various other home loan linked features offered by other home loan lenders. Your final home loan application should be with the lender charging you the lowest rate for the optimal loan amount and tenure. 

Not assessing your EMI repayment capacity.

Generally, home loan lenders factor in your EMI repayment capacity when assessing your home loan application. Usually, lenders prefer lending those with an overall EMI obligation, including their existing and new home loan EMI of under 50 to 60 % of their monthly income. Those surpassing this set limit have lower chances of getting their application for a home loan approved. Thus the home loan applicants exceeding this set limit should reduce their loan repayment obligation either by prepaying some of their debts or opting for higher loan tenure or making a higher down payment towards a home loan. Also, home loan applicants should take the help of the Tata Capital home loan EMI calculator, particularly designed to know their optimum EMI based upon their repayment capacity. Applying for a home loan after being aware of the optimum loan EMI can reduce your EMI default chances in future. 

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