Obtaining a home loan not only allows one to realize their lifelong dream of home ownership, but it also provides twin tax benefits under sections 80C and 24b.
And that is not all. Furthermore, because most house loans entail greater loan amounts and longer loan terms, any error or improper judgment might have long-term financial ramifications for the borrower. As a result, here is an important list of five critical questions you, as a borrower, should ask yourself before applying for an HDFC home loan.
What is the best interest rate for you: fixed, hybrid, or floating?
When applying for a house loan, the borrower must choose between fixed, hybrid, and flexible HDFC home loan interest rate. Regardless of market swings, the fixed interest rate remains consistent during the loan’s term. However, keep in mind that some lenders only offer fixed rates for a portion of the tenure rather than the entire lifetime.
Flexible HDFC home loan interest rate, on the other hand, is linked to the marginal cost of lending rate (MCLR), which is dependent on the RBI’s repo rate. And, because the RBI assesses this rate on a regular basis, banks must alter their MCLR or RLLR to reflect changes in the repo rate.
A fixed-rate HDFC Home Loan may be considered if the borrower chooses a fixed monthly EMI that is not liable to fluctuate owing to market volatility. Keep in mind, however, that if the HDFC home loan interest ratefalls in the future, the borrower would lose the benefit of lower EMIs and will be forced to continue repaying the loan at the fixed rate. Some lenders also provide hybrid rate loans, which comprise a fixed rate for the first few years followed by a variable rate.
Even if an increase in the MCLR or RLLR would indicate an increase in the existing interest rate on the reset date, this increase can be countered through prepayment or by choosing a home loan balance transfer with a floating rate.
Keep in mind that while servicing the house loan in accordance with your home loan eligibility, the borrower may transfer from floating to fixed rate and vice versa; nevertheless, the lender will assess rate changeover fees.
Should you choose a loan repayment period that is shorter or longer?
The amount of EMI you will be required to repay each month on a house loan is greatly dependent on the loan tenure you choose, the loan amount, and the relevant interest rate.
As a result, it’s critical to determine your loan term properly. Because HDFC home loan
typically include large loan amounts, choosing a shorter period would indicate larger EMIs, which may overburden your monthly budget and leave less room for liquidity.
Even if you are financially capable of making payments of higher EMIs per month as per your home loan eligibility, it is still advisable to opt for a longer tenure, as it will not only increase liquidity into your monthly finances but will also allow you to invest the extra or additional amount (that you could have repaid in the form of higher EMI or Equated Monthly Installments) over a period of about 7-10 years (preferably in a mutual fund SIP) & then prepay or foreclose the home loan after accumulating the necessary corpus.
As a result, a long tenure provides you with not one but two benefits: first, a lower EMI amount, and second, it allows you to avoid overextending your otherwise long loan tenure (which is as long as 30 years) by prepaying/foreclosing it in roughly 10-15 years.
Which repayment style and options are best for you when serving loan at HDFC home loan interest rate?
With a slew of lenders popping up and offering house loans at low rates after taking into account the borrower’s home loan eligibility, home purchasers have benefited from the fierce competition. To attract consumers, lenders are innovating and offering new types of house loans, as well as new modes and repayment alternatives, in order to provide maximum ease to prospective borrowers.
These include repayment choices such as step-up/step-down EMIs, providing an initial holiday (moratorium) period of up to 3 months, and so on.
Aside from such repayment alternatives, the borrower must also select an appropriate manner of EMI payments. Most lenders, such as HDFC home loan, also provide several means of repayment, such as Electronic clearing service (ECS)/Standing Instruction (SI), in which EMIs are automatically withdrawn on a monthly basis, or the option of post-dated cheques (PDCs). However, ECS is the favoured and mostly compulsory option because it is easier, faster, and has fewer risks of error, and there is no need to replace the cheques if the EMI changes in the future.
How do you pick the best lender?
Another critical decision to make when applying for a house loan based on your home loan eligibility is selecting the correct lender based on your loan needs. Make certain that you do not compare the suitability of various lenders solely on the basis of the interest rate offered but also on other aspects such as the required loan amount, tenure, various charges and fees, and the lender’s eligibility condition.
Borrowers can use online financial marketplaces to choose the best lender for their house loan because these platforms assist in matching the proper lender for each borrower and include numerous online tools such as loan eligibility and EMI amount calculators.
Are you on the correct track to obtaining the best home loan possible?
With relatively large loan amounts and repayment terms ranging from 15 to 30 years for HDFC home loan, all of the above-mentioned considerations are critical to obtaining the correct home loan agreement that does not negatively affect your financial health and allows for hassle-free payments. Given that even a small change in HDFC home loan interest rate can result in a significant difference in overall interest expense, make sure to consider all of the variables that influence the home loan. Interest rates for your home loan eligibility criteria, such as credit score, tenure, income, loan amount, employment profile, and so on. This can help you find a suitable home loan offer with the lowest interest rate based on your eligibility and needs. Aside from that, make sure to repay your house loan EMIs on time and make prepayments during the term whenever you have extra money. This would help to reduce the overall interest expense even more.
