By Mr. Prashant
Joshi, Deutsche Bank India
Planning your first
house can be a daunting task. Careful planning and a structured approach can
help you get closer to your goal.
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| Mr. Prashant Joshi |
Here are a few
pointers to help you in planning your first house loan. Before applying, you
need to give thought to:
Clean Credit
History..!
Keep your credit
(Debt) history clean. This is one of the most important parameters that the
lenders look for. The idea is to demonstrate to the lender that you have the
financial discipline that is required to repay this loan.
More Margin Money..!
Put aside more margin
money for your contribution. Banks & HFCs (Housing Finance Companies), fund
up to 80 per cent of the agreement value with 20 per cent being your
contribution towards the property.
Usually house buyers
spend all available finance on margin money requirements & are left with little for the interiors. Get a
good understanding of the outlay on interiors & set aside funds.
Under Construction
Property - Additional Expense..!
Buying an
under-construction property comes with an additional expense in the form of
Value added Tax & Service Tax. This
will have to be funded by you as lenders are currently not funding this
component.
Pre - Approved
Housing Loan..!
What should I opt for
first? There is no right or / wrong here. The merit of first identifying the
property is that you can avoid spending time & money on getting your
housing loan pre - approved &
finding out later that the property does not fit the requisites of the
lender.
The merit of getting
your home loan approved first is that you get to know the maximum loan amount
that the lender is willing to approve & therefore take an informed decision
on the value of the property.
Keep Financial
documents Ready..!
You are expected to
furnish various documents to the lender for obtaining an approval.
These include
financial documents like bank statements, salary slips, Income tax returns,
form 16 and KYC (Know Your Customer) requirements like identity & address proof.
Selecting Lender Vs
Selecting Property..!
Selecting a lender is
as crucial as selecting the property. You must invest as much time, energy
& dedication while deciding on the
financing options available.
You should base your
decision on the following factors amongst others:
Fee and charges:
All banks or HFCs
charge a processing or / administrative fee for processing the borrower's
housing loan application.
The quantum of
processing fees varies in the range of 0.50 per cent to 1 per cent of the total
loan amount& this information is available on the schedule of charges which
is published on the website of all banks or HFCs.
It should be noted
that payment of processing fees does not guarantee sanction of a loan.
Additionally, you
should also review the schedule of charges for other possible charges that can
be levied by the lender for administrative services in the future.
Rate of interest:
While it is common
belief that interest rates heavily impact the monthly outflow, if the differential
between 2 lenders' offerings is small you must look at other factors. A 0.25
per cent difference in interest rate (20 year loan) impacts the EMI by Rs. 16
per lakh.
You will also have to
choose between a fixed or / floating rate of interest.
A fixed interest rate
(may be fixed for entire loan tenure or for a certain time period) ensures that
the monthly EMI remains the same over the fixed period.
Floating interest
rates are dynamic& may move up and
down based on the market situation resulting in proportionate change in the EMI
or / the loan tenure.
Loan Structures:
Various types of
loans like step-up (where EMIs are lower in earlier years & increase later)
and step - down loans (where EMIs are higher in earlier years) are available to
match your repayment capability over a period of time.
Study the suitability
for you.
Faster turnaround:
Time taken to process
the housing loan is crucial since most buyers would usually have finalised the
property and plot of land & may have paid earnest money to the builder /
promoter/ or developer or / seller.
Thus, depending upon your circumstances, the turnaround time to process the
loan may become an extremely critical aspect while choosing the lender.
All the best...!
About the author..!
Mr. Prashant Joshi is
MD and Head, Private and Business Clients, Deutsche Bank India
Contact details…!
Mr. Prashant Joshi
Managing Director -
Private and Business Clients
Post Box No : 9095, Goregaon Post Office
Goregaon East, Mumbai
- 400063
Tel no. : +91 (22) 7180 3681
Fax no. : +91 (22) 7180 3963
Email ID :
prashant-p.joshi@db.com
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