Points to remember while buying a home & availing a loan
Buying one’s first home is a big step ahead for any individual. Needless to say, a decision like this, requires thorough research and preparation before making a home loan application. Preparedness for a home loan does not only mean scouring for lenders who provide the lowest interest rates and the most convenient repayment terms. You are only truly prepared if you are able to envisage your entire loan repayment tenure and have taken adequate measures to see that you are protected from exigencies during this tenure. Here are some hacks to help you make home financing easier for you.
Benefit from the Pradhan Mantri Awas Yojana (PMAY)
You can benefit from the Pradhan Mantri Awas Yojana or PMAY if you wish to buy a new house or buy a house through repurchase. The PMAY is a credit-linked subsidy scheme (CLSS) that had been conceptualised in 2015 to cater to the housing needs of the economically weaker sections(EWS) and lower income group (LIG) of the society as well as the middle income segment (MIG) (Refer to the table to find out the eligibility and benefits under each head). Check your eligibility under the PMAY before making a loan application. To enhance your eligibility under PMAY also consider booking your home in the name of your wife or mother, as PMAY encourages women to be houseowners. Women are likely to get preferential allotment over male applicants under PMAY. Besides, most lenders offer special rates of interest for women, so you can be a beneficiary on both counts.
| CLSS for EWS/LIG | CLSS for MIG (I) | CLSS for MIG (II) | |
| Scheme Parameters | |||
| Maximum household income per annum | Upto Rs 3 lakhs for EWS and Rs 6 lakhs for LIG | Above Rs 6 lakhs and above Rs 12 lakhs | Above Rs 12 lakhs and upto Rs 18 lakhs. |
| Maximum carpet area of the house | 30 sq mtr for EWS and 60 sq mtr for LIG. | Upto 90 sq mtr | Upto 110 sq mtr |
| Ownership | Women must be sole or co-owners of the property | No gender specifics. Any adult family member can be an owner. | No gender specifics. Any adult family member can be an owner. |
| Maximum loan amount eligible for subsidy | Upto Rs 6 lakhs | Upto Rs 9 lakhs | Upto Rs 12 lakhs |
| Subsidy percentage | 6.5% | 4% | 3% |
| Maximum tenor on which loan subsidy will be calculated | 20 years | 20 years | 20 years |
| Maximum subsidy amount payable | Rs 2.68 lakhs | Rs 2.35 lakhs | Rs 2.3 lakhs |
To keep EMI low opt for a longer tenure
If affordability is your primary concern, you can keep your EMI low by increasing home loan tenure. Some lenders offer a home loan tenure of as long as 30 years. The advantage of a longer tenure loan, is that you can keep your EMI low and repayment of your home loan will not lead to a compromise of your current lifestyle. However do bear in mind, that the longer the tenure of your loan, the higher is your interest pay out. While deciding on your home loan tenure thus opt for a time frame that does not clash with your existing financial commitments and future financial goals.
Reduce interest burden while making repayment
A home loan is a long term debt burden, but certain tips and tricks can alleviate your interest burden, during your loan tenure. For instance, each time you have some extra cash (in the form of income tax returns and bonus over your salary account) consider repayment of the principal amount in spurts. The faster you can pay your principal amount, the lower is your interest burden. Further, you can choose to increase your EMI amount by 5% each year by aligning the increase with every increase in your salary. Further, be on the lookout for lower interest rate and consider refinancing if it brings across significant benefits.
Safeguard your life and property
When you opt for a home loan, you are taking on additional liability that will be passed on as a legacy of a debt burden to your family members if you do not take an insurance cover to protect your liability. While a lot of lenders cross-sell a gamut of insurance products, you can opt for a simple term insurance plan, that is low cost in nature and offers high maturity value. This kind of cover will be adequate to take care of your home loan repayments, in the case of your unfortunate demise. Effectively your EMI amount will enhance by a tad, but will not pinch your pocket significantly.
Following these anecdotes will not only help you choose an appropriate lender but will also make repayments on your home loan easier. This is turn, will also help you build an maintain a good credit score that will open doors when you are in further need of credit.
