Is this Really the Best Time to Take Home Loan? In the last few quarters, the RBI has reduced the repo rate by 0.5%. After this reduction, the rates on the home loan have been cut by banks and lenders. As a result, the rates of the home loan have decreased. The repo rate is also used by monetary authorities to control inflation. If the repo rate is low, banks have to pay a lower interest amount on their borrowings. This will enable them to charge lower interest rates on the home loans taken by the housing finance companies. Then the housing finance companies can pass on this benefit to the customers by reducing their lending rates on home loans.
However, the reduction of repo rate announced by RBI does not automatically reduce the rates on home loans. The impact of the reduction of rates affects different banks differently, as they may or may not choose to reduce their base rate. In case, they lower their base rate, the home loans on floating rate of interest will get favorably impacted and accordingly their EMIs will get reduced.
Recently, the Governor of Reserve Bank of India asked the developers to bring down real estate prices to boost demand. He said that if developers bring down prices, more people would come forward to buy property. He suggested that banks should also make home loans easier but stressed on the fact that the demand would not go up if property rates remain high. Many lenders are already providing discounts, schemes and special offers on their home loan. During the festive season, an additional discount or fall of 10% is likely. Keeping in view the present scenario, a buyer should not wait further and look for all options. Due to high supply and low demand, buyers are in a better position to negotiate on prices. Instead of waiting, buyers should try to seal the best deal and ask for more.
Considerable Factors Before Taking a Home Loan:
It is important that before you avail a home loan you from any bank or other lenders, you should carefully analyze the property you invest in, your cash flows towards the EMI, the reputation of the lender, the required approvals for the project, etc. In case of a home purchase loan, you need to ensure that the unit agreed to be sold to you is not a subject matter of any prior bank loan, which the builder has taken. If there is any such loan, ensure that the concerned bank gives the NOC in respect of your unit.
There are following factors to be considered before you take a home loan:
- In such times, when the interest rates are expected to come down further, you must go with the floating rate scheme.
- In a long-term loan, the interest charges are very high, so it is best to take a loan which has the shortest tenure that you can afford.
- You should ensure that the property, which you are buying, is legally approved and verified by various authorities.
- Consider the fees and other charges applicable to the home loan such as documentation, pre-payment of the loan, late payment of EMI, etc.
- You should look out for transparency in the home loan process and also consider the expected processing time.
- If you take a large amount loan such as a home loan or car loan, it is best to take insurance cover as well. Buy a term plan of the same amount of your loan to ensure that your family is not saddled with unaffordable debt if something happens to you.
- Before applying for a home loan, you should check your CIBIL report, as all banks look for good CIBIL scores before giving loans.
- Do not read the loan documents carelessly. It includes various legal points which are not stated in the normal conversation. Paragraph after paragraph of legalese printed in a small font can be a put-off. So, to avoid unpleasant surprises, read the terms and conditions carefully.