Affordable Home Loans: Your Path to Homeownership

Home loan borrowers commit to a massive responsibility, one that easily stretches for at least a few years. The average tenure for home loans is 20 to 30 years. In other words, when a homebuyer decides to acquire a home through housing finance, they essentially enter into a commitment that they will devote a significant portion of their monthly income toward the repayment of their home loan. Unfortunately, life is unpredictable, and sometimes, we are forced to face situations that we are not ready for. All home loan borrowers are therefore advised to do two things when they avail themselves of a loan. First, they must set aside an emergency fund to help them stay true to their EMI commitment if a difficult situation arises. Second, all home loan borrowers must try to secure a low housing interest rate loan. 

How does the home loan interest rate affect one’s ability to repay their loan? The housing loan interest rate that one gets offered has a direct impact on one’s EMIs, total interest they will pay on the loan and the total cost of borrowing funds. A high housing loan interest rate directly translates into high home loan EMIs, high total interest outgo on the loan and the final cost of borrowing funds and vice versa. Affordable home loan are low-interest-rate loans that are easy to repay.  In this article, we share some simple tips that will help you secure affordable housing finance. 

Affordable Home Loans: Here’s How You Can Get One 

1. Maintain a High CIBIL Score: An individual’s CIBIL score reflects their intent to repay a loan on time. A high CIBIL score indicates a clean repayment track record, a not-too-excessive dependency on credit and a clean intent and ability to repay loan EMIs on time. To secure an affordable home loan, you must maintain a CIBIL score between 750 and 900. If your CIBIL score is lacking, it’s best to wait, work on your credit rating first and then apply for a loan. 
2. Opt for a Low LTV Ratio Loan: Housing finance is a secured loan product. The home that one buys with the loan funds serves as collateral or security. The LTV Ratio essentially tells a lender what percentage of the pledged collateral’s net market value is being asked as a loan. When loan applicants ask for a very high loan amount compared to the market value of the pledged collateral, the risk for the lenders is high and therefore, high LTV ratio loans attract high housing loan interest rate. Individuals seeking affordable home loans must pay as high a down payment as they can to try and secure an affordable home loan. 
3. Maintain Job and Income Stability: Lenders take an individual’s income and job stability very seriously. People with stable incomes and jobs rarely default on loan repayment and therefore, can be trusted with timely repayment of home loan EMIs. Consequently, people with low CIBIL scores are more likely to be able to easily negotiate for better loan terms and conditions, including low home loan interest rates. 
4. Claim Home Loan Tax Benefits: If you want to make your home loan affordable, make sure to claim all the home loan tax benefits available to you. Under Section 24b of the Income Tax Act, borrowers can claim tax benefits up to a maximum of Rs.2 Lakh on payments made towards the repayment of the interest part of one’s home loan. Under Section 80C, home loan borrowers can claim home loan tax benefits on payments made towards the repayment of the principal portion of their home loan. The maximum limit permissible under Section 80C is Rs. 1.5 Lakh. To reduce the cost of borrowing funds in the case of home loans, borrowers must always claim home loan tax benefits under various sections of the Income Tax Act. 
5. See if You Are Eligible for any Government Schemes: The Government of India has always tried to promote homeownership. One of the ways how it does so is by offering interest subsidies on home loans. If you are repaying a home loan, you must check if you are eligible for any of the government schemes that give buyers access to home loans at subsidized home loan interest rates.

All homebuyers must borrow keeping their home loan eligibility in mind and also use the home loan calculator to make the process of home loan repayment and planning smooth.