Vasudha and Abhinav Kapoor, both working professionals, have lived in a rented home for five years. They are now ready to buy a Rs.2.5 crore house in Mumbai and have saved Rs.90 lakh for the down payment. They are also exploring home loan offers from banks and housing finance companies. They have checked the interest rates and are leaning towards the lender offering the lowest rate. Is choosing a home loan solely on the basis of interest rate the right approach?
When financial institutions and lenders offer a loan, the risk remains on their books, making it their responsibility to assess the creditworthiness of the borrower. For borrowers, the focus should be on comparing the product and service features. The key aspects to evaluate include loan tenure, fixed versus floating interest rates, and administrative or processing fees.
Vasudha and Abhinav Kapoor must carefully review and compare the terms and conditions from different lenders before finalising their decision. The loan amount, or the percentage of the property cost a lender is willing to finance, can vary. As borrowers, the Kapoors may want to minimise their monthly equated monthly instalment (EMI) outgo. The EMI depends on the loan amount, tenure and interest rate. They should evaluate which combination suits them best and check if any of these terms are subject to change during the loan period.
While the Kapoors may want to maximise the loan amount, they must ensure that the EMIs and administrative costs remain manageable. Service-related factors, such as loan sanction timelines, paperwork, compliance checks and disbursal time, can vary across lenders. Evaluating these aspects carefully will help them make an informed and practical choice.
Content courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
When financial institutions and lenders offer a loan, the risk remains on their books, making it their responsibility to assess the creditworthiness of the borrower. For borrowers, the focus should be on comparing the product and service features. The key aspects to evaluate include loan tenure, fixed versus floating interest rates, and administrative or processing fees.
Vasudha and Abhinav Kapoor must carefully review and compare the terms and conditions from different lenders before finalising their decision. The loan amount, or the percentage of the property cost a lender is willing to finance, can vary. As borrowers, the Kapoors may want to minimise their monthly equated monthly instalment (EMI) outgo. The EMI depends on the loan amount, tenure and interest rate. They should evaluate which combination suits them best and check if any of these terms are subject to change during the loan period.
While the Kapoors may want to maximise the loan amount, they must ensure that the EMIs and administrative costs remain manageable. Service-related factors, such as loan sanction timelines, paperwork, compliance checks and disbursal time, can vary across lenders. Evaluating these aspects carefully will help them make an informed and practical choice.
Content courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
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