22-Jul-2021 |Home Loan Interest Rate
The home loan, as we all know, holds a pretty long tenure while it is paid back. Among the imperative elements of this loan is the rate of interest associated herewith. Now we will consider the two types of interest rates viz. Fixed and Floating Interest Rate:
Fixed Interest Rate Loan
In the Fixed Interest Rate Home Loan, the interest rate is affirmed prior to the time you go in for the loan. The equated monthly installments i.e. EMIs are fixed for the complete loan tenure if one chooses this interest rate. In case, even if there is a change in the Repo Rate or the market interest rate, this rate of interest would not change. Thus, you can easily calculate the amount of interest that is payable in the form of EMI in advance and accordingly plan the budget.
Floating Interest Rate
As far as floating rate loan is concerned, the change in Repo Rate changes the rate of interest here. It is the Reserve Bank of India that ultimately announces the policy rates, which affirms the Repo Rate. It may also be added that if the Repo Rate shoots up, then the home loan rate also follows suit and moves up. While, in case, the Repo Rate dips down, the home loan rate also comes down.
It may be mentioned that a change will be observed in the floating rate and this only depends on the conditions observed by the bank. The term used in this pretext is ‘reset’ and the bank informs the borrower about the frequency associated with the reset in loan application. As and when a change is observed in the rate of interest then either the EMI or the loan tenure shows a change.
What is Repo Rate?
Repo rate indicates the rate at which financial institutions borrow money by liquidating their securities to the Reserve Bank of India (RBI), in the event of funds shortage or other statutory measures. It’s an important tool for RBI to keep inflation rate under control.
How Do Floating and Fixed Interest Rate Loans Differ?
If at the time of applying for a loan, an individual thinks that the interest rates are low, he may go in for a fixed interest rate loan. This helps him to enjoy lower rate of interest and that too, valid for the entire loan tenure. On the other hand, if one thinks that the rate of interest may go down in the future, one can choose the loan with floating interest rate. Here, one can enjoy the benefits associated with this type of interest rate.
In the current pandemic situation, if you are planning to opt for a home loan then this is the best time to avail it, as the RBI repo rate has plunged to its lowest. You can opt for the fixed home loan interest rate.
27-Mar-2021 |Home Loan EMI Calculator
Here are the five benefits of the EMI calculator that would make things easier in making you pay your monthly payments towards your loan
Loans have become an important part of our lives. From buying a house, a car to managing children’s overseas education, we can’t do without loans. And, when we talk about loans, the word EMI (Equated Monthly Instalment) immediately comes to mind. EMI implies monthly amount payments we make towards a loan we opted for. An EMI calculator like a home loan EMI calculator is an online tool, easy to access, and enables you to calculate the amount you need to repay each month towards your loan. The EMI calculator factors three important aspects: the loan amount, number of months, and interest rate. An EMI is an amount that is payable by you every month to the lender in order to satisfy the principal and the accumulated interest.
Calculation much easier
The calculation makes the world go round. It is extremely important to calculate your EMI amount before completing all the formalities of the loan. Because everything hinges on calculation. So, if you are one of those customers who have applied for a loan, enter the loan amount, rate of interest, loan tenure and processing fee. The home loan calculator will do the necessary calculation and give you the EMI amount. The loan amount calculator will tell you how much you can borrow.
Access the calculator at home
The best thing about a calculator is that it can be accessed anytime and anywhere. You can use the calculator umpteenth number of times depending on your convenience. That is much better than paying a visit to the bank and figuring out complex mathematical calculations that might drive you crazy. If it’s not too much to ask, just access the internet at home and use the EMI calculator.
Less time consuming
If you are planning to rely on your manual calculations to work out the details of your loan amount and interest rates, better avoid this tedious route. Moreover, manual calculation is generally lengthy and time-consuming. It would test your patience at every step. Better go for a home loan calculator for EMI as it works smoothly and quite fast, displaying the results in the blink of an eye. Home loan planning involves proper calculations and so you can’t go wrong with the numbers. A home loan EMI calculator gives you the correct result, every single time.
Comparing loan offers of banks
When you go for a loan, the important thing that needs to be kept in mind is to compare the loan offers from different banks. Here, your EMI loan calculator would come in handy. You can find out the total cost of the loan along with the respective EMIs. As a result, you can easily choose the best loan option available that suits your requirement. Loan interest rates vary from lender to lender. Even a mere 0.04% difference in home loan interest rates can significantly impact the EMI amount.
Go for a Loan-specific EMI calculator
Using a loan-specific EMI calculator is much easier and makes your job that much smoother. In other words, one can use a different calculator for every type of loan be it one for education, home or car. The parameters for every loan may be basically the same, but there can be instances where you will need to use loan-specific EMI calculators. The suitability of the EMI calculator can be measured in terms of a particular loan and to be used for only the specific one.
27-Mar-2021 |Home Loan
With low-interest loans announced by various leading banks, is this the best time to buy a home? Read on to find out…
The pandemic has created a sense of uncertainty and volatility in the world as never before; even it in the sphere of the economy or job market. No one can say with any degree of certitude what will happen next. In the banking sector, a change is perceptible in the way many banks are currently providing low-interest rates for home loan and construction loan. Obviously, low-interest rates, post-pandemic, are like the manna from heaven for potential homebuyers.
So, for those, who are toying with the idea of buying or constructing a home, this is the best time to apply for loan and having a home of your own which is also a source of emotional solace in these hard times. It has been seen that banks try to outdo each other by winning over borrowers with their own attractive rate of interest. Recently, banks have considerably reduced their rate of interest as the repo rate set by the Reserve Bank of India (RBI) is now at its lowest.
If current trends are to be believed, most of banks are willing to provide home loans with floating interest rates that are acceptable to the borrowers. Prospective homebuyers should always remember that these loans are related to and determined by repo rate which implies that whenever there are adjustments or changes in the key policy rate, it may lead to a relative hike in the corresponding rate of interest.
Homebuyers, on their part, should have satisfactory income flow to pay their entire EMI before or the stipulated deadline. If your creditworthiness or credit ratings are high, you will get the best of interest rates. Those with a low credit score may find the going tough when it comes to getting a pocket-friendly interest rate. So, they better ramp up their credit score.
However if someone is new to credit i.e No credit score and have informal income meaning no IT returns or audited financials can also avail Home loan. There are quite a few housing finance companies available in affordable housing finance space with better reach even at semi-urban and rural areas.
Whenever you go for a home loan or construction loan, touch base with the bank where you are a customer. After all, the bank where you hold an account would offer you a better deal as compared to what other banks are offering you. Once you avail a low rate of interest, you can go for a higher loan and repay the same within the stipulated time period.
Borrowers now have a choice of settling for a fixed rate over a floating one. Since floating interest rates are determined by RBI, it can overturn your applecart in terms of your EMIs. So, just go for fixed rates when availing of home loans as interest rates are quite low. It will also help you manage your monthly finances. On the other hand, floating-rate suits those borrowers who are not sure about the volatility of interest rate movements and would rather be comfortable going with the market rates.
We would advise you to opt for the loan with smooth processing and disbursement periods, ideally online loan and it is applicable for all types of loans like MSME Loan, construction loan, home renovation loan etc. Financial institutions or banks take a minimum period of fourteen working days to approve a home loan application. Then it takes another four to five days for the loan amount to be disbursed. The disbursement period generally varies from lender to lender.
14-Aug-2020 |Home Loan
Home is one of the basic necessities for all and to own one is actually a dream for every Indian. Home is not just a structure with four walls and a roof; it also comes with an emotional side attached to it. For some, it may be about a sense of security, comfort, and an accomplishment, while for others it is about being independent and carrying a status in the society.
But on a candid note, buying a home is no small expense. In the context of Indian society, the decision to buy a home is not only a major decision and a milestone in one’s life but also the biggest financial decision to make. Since it requires a huge expense and a big financial commitment, one may feel that why not choose the option of living on rent – it is a better fit.
The debate goes on – buy a home or rent a house –which one is better? It is difficult to choose from these two options.
Let’s try to understand why buying a home is better than living on rent. Just have a look!
Freedom and Security
Owning a home always gives you greater freedom, for the way you live and how exactly you have dreamt of living within one. There are multiple options of buying a home – you can buy a ready to shift home, and you may go on to purchase a plot and construct a home over it. Renting a home will always invite certain compromises like location, size, amenities, etc. For spending your life, for sure you would look for freedom within your living space.
Purchasing a Home provides added security, privacy, and comfort not only to you but also to your family. The fear of untimely termination of the rental contract, infringement within the private life from landlords is automatically taken care of when you own your home. Additionally, the decision to change or remodel/renovate, extend, utilize the space as per your choice (covered and open both), is always with you and your family – there are no permissions required, but when you are renting you are dependent on landlords consent –even to hammer a nail in the wall. And it means – when you own your home, you are your own boss!
Tax Benefit on Home Loan
One big reason, why people do not go for buying a home, is skyrocketing and fluctuating prices of real estate. However, when you opt to buy a home by availing a Home Loan, you get entitled to avail Tax Benefits on the Home Loan Principal and Interest you payback. These benefits basically add-up to an affordable deal, in owning your home.
Availability of Easy Financing Options
Times have changed. Today, a lot of easy financing options are available in the market. Apart from banks, there are multiple financial institutions that provide loans. Housing Finance Company(s) like Aavas Financiers Ltd. provides up-to 90%*of the cost as Loan to prospective buyers, which means that the down payment is not heavy on your pocket and easy to arrange.
On the other hand, you don’t get any such benefits when you live on rent. The entire money you pay becomes your expenditure, which increases with time.
On the above perspective let’s see what all benefits you get when you opt to buy a home by availing a Home Loan– You get Tax Benefits, the amount paid to buy a home with interest is fixed, however, with time the Property Value appreciates and the appreciation is much more than inflation rates.
In return to what you pay as cost and interest on your home loan – what you get is the property, but the rent paid never gives you any return. They are expenditure which keeps on increasing with every passing year, as per the terms of Rental Agreement.
Let us understand this with an example here – assume that there are two houses each costing 15 Lakh Rupees
> Rent a property – you will have to pay some amount as rent every month. Assume you are paying a rent of Rs 7,500 per month, which increases every 11 months at the rate of 8%.
> Buy a property – you will have to take a loan, which will cost you Rs 13,000 per month as EMI for 20 years, and also you pay a down payment of 5 Lakh Rupees from your side.
While it appears that if you are staying on rent, you save Rs 5,500 per month and above that, you have shell out 5 Lakh Rupees as a down payment – which you could have invested in a SIP or any other scheme of your choice. However, when you analyze in detail, you will find that the gap in the EMI v/s rent ratio increase with time. Let us see how
It is very clear and evident that owning a home is a much better deal as compared to living on rent.
Owning a home is not as difficult as it seems. You simply need to plan it wisely and go for it. Aavas Financiers Ltd is a leading housing finance company that has helped lakhs of customers in fulfilling their dreams of buying their dream homes.
We at Aavas, firmly believe that every individual who wishes to have a home should get an opportunity to own it, irrespective of his/her financial status. And that is why we provide housing loans to customers in low- and middle-income segments in semi-urban and rural areas too.
Start the journey of being a proud owner of your dream home with Aavas Home Loan today – Sapne Aapke -Saath Hamaara!
*Subject to NHB norms and eligibility.
01-Jan-2020 |Home Loan Eligibility
‘Buying a home for your family’ that’s what going at the back of your mind? If yes, then this article is a must-read for you.
Buying a dream home is always a crucial decision of an Individuals life. One needs to do a lot of arrangements & adjustments in their budget & financials. Most of the time, It may happen that your dream home budget goes out of your pocket. It’s the situation when you have to make a decision, either to drop your plan or opt to apply for a home loan and make your dream come true.
Before you apply for a home loan, it is advisable to check your home loan eligibility, so that you have a clear picture of your eligibility.
When you apply for a home loan, the lender would assess your credibility to repay the loan amount within an agreed time frame based on the home loan eligibility criteria.
Home Loan eligibility is defined as the maximum loan amount that you can expect to get, based on certain criteria such as your current source of income, repayment capacity, age, credit score, and many others.
In this article, we will walk you through 6 vital steps that help you to increase your home loan eligibility without having any trouble.
All your existing unclear loans would negatively impact your home loan eligibility criteria. The previous loan dues would majorly hit your home loan eligibility. A lender would always consider your outstanding dues before sanctioning your home loan.
Before seeking for a home loan, make sure that you have cleared and closed your entire existing loans, collected no-due certificate and get it updated in your CIBIL credit score.
Your home loan eligibility criteria are determined by your repayment ability of loan amount every month which is what we called as equated monthly installments (EMIs).
If you go with longer loan tenure, you would have to pay lower EMIs every month, which fits to all middle and lower middle-class applicants’ to repay their loan amount and you are eligible for higher home loan amount to buy your dream home for your family.
But longer loan tenure means you would have to pay higher interest to the lender.
Don’t get disappointed, there is a solution to this situation as well.
Considering that your income would increase every year, the option is to increase the EMI amount every year with an increase in your income. You just need to restrict your expenditure to some extent and you would pay off the home loan amount in a lesser time period.
You can even take help of an online home loan EMI calculator which is available on Aavas Financiers website for you to quickly calculate your EMI based on your tenure, interest rate & loan amount.
Fixed Obligation to Income Ratio (FOIR) is a critical parameter for determining your loan eligibility. It is defined as the part of your source income currently being used for loan repayment.
Higher the FOIR, lower the chances for loan eligibility. Therefore, try to limit your FOIR to up to 40% in order to increase the chances of loan approval.
You can lower your FOIR either by increasing your source of income or you have cleared out all your debts.
Lower FOIR means your liabilities are less which enhances your disposal income, thereby increasing your repaying capacity.
The home loan lenders of any financial institution or banks consider your credit report to measure your repayment behavior and mark you as high-risk or a low-risk potential home loan applicant accordingly.
The CIBIL score is one of the significant factors while the lender approves your home loan. Your CIBIL score is a measure of your capability to repay the loan amount within an agreed time frame. Always maintain a credit score greater than 750 (out of 900) to increase your home loan eligibility and even helps you to avail lesser interest rate from the concerned loan provider.
Low income, low credit score and so on are common factors for the rejection of home loan applications by the lenders. You can increase your home loan eligibility by choosing joint home loan instead applying as an individual applicant.
A joint home loan means you need to consider a co-applicant who is your immediate family member (salaried or self-employed, Indian or NRI).
If your co-applicant is a woman then even better, as woman co-applicant enjoys a lower rate.
By this method, you would increase your eligibility loan amount to many folds because your co-applicants source of income is also considered by the lender in assessing your eligibility criteria. And other benefits as well such as tax benefits, share loan repayment amount and so on.
If you are failing to fulfill the home loan eligibility criteria, then you can even consider other income sources such as rental income, interest earned from fixed deposits or any bonus amount you have received from your employer or extra income earned as part of your freelancing work. All these sources of income would back you as well to enhance your home loan eligibility criteria for buying your dream home.
During the loan approval process, make sure that you have disclosed all the correct information in your application. Otherwise, you may face rejection in your home loan application.
Aavas Financiers Limited is a housing finance company helping many to fulfill dream of owning their dream home. Aavas Financiers Ltd has the vision to help majority of Indian population which belongs to low and middle-income by offering them home loans, plot purchase loan & construction loan, loan against property and balance transfer. You can take the help of home loan eligibility calculator or home loan EMI calculator to avoid Home Loan rejections.
