Home loans can help you live your dream of becoming a homeowner. These loans, which are paid through home loan EMIs, are easy to repay, especially if the loan borrower plays smart and secures an affordable home loan. An affordable home loan is simply a loan whose EMIs you can comfortably repay. This brief guide will walk you through tips that will help you secure a low housing loan interest rate and an affordable home loan.
Finding Affordable Home Loans: Tips and Tricks That Will Help
- Check If You Are Eligible for Government-Funded Housing Schemes: The government of India and several state governments run various housing schemes, specifically for individuals belonging to lower-income groups. For instance, under the Pradhan Mantri Awas Yojana (PMAY), people belonging to lower-income, middle-income, and weaker sections of society can secure funds at highly subsidized housing loan interest rates, making loan repayment easy and stress-free.
Other than PMAY, schemes such as the Credit-Linked Subsidy Scheme (CLSS), Rural Housing Subsidy Scheme, and HUDCO’s Individual Housing Loan Scheme are the other affordable home loan schemes run by the central government. Additionally, state governments also run various affordable housing loan schemes, including the Haryana Housing Board Scheme, the Kerala Housing Board Scheme, and the Maharashtra Housing and Area Development Authority Scheme.
- Compare Loan Offers Using a Home Loan Calculator: One of the first things that you must do to secure a low housing loan interest rate is consult with as many banks and NBFCs as you can to get a realistic idea of what loan terms and conditions you are eligible for. This will also help you know the lowest or the best home loan interest rate you can get. Once you have all the offers in hand, use the home loan calculator to compare offers and select the right one for you. The home loan calculator is an online tool that lets us calculate home loan EMIs for different combinations of loan value and tenor. The calculator can also help you decide the loan amount you are eligible for and applying for a loan amount that you qualify for based on your income and other factors and can comfortably repay can go a long way in helping you secure the most profitable housing loan deal.
- Build a Strong Credit Rating: An individual’s credit score is a three-digit number between 750 and 900. Financial institutions generally take into consideration the CIBIL score, which is the credit score assigned by TransUnion CIBIL, one of the oldest credit information agencies in the country. A high credit score, i.e. anything in the range 750 to 900 indicates high creditworthiness and repayment capacity and low chances of a loan default. People with high CIBIL scores are extended the best home loan offers. Building and maintaining a high credit score is easy if you use credit judiciously, do not become excessively dependent on it, and maintain a low credit utilization ratio and a healthy mix of secured and unsecured loans.
- Maintain a Low FOIR: FOIR or fixed obligation to income ratio is the ratio of your total income going towards the repayment of debt. A high FOIR indicates that a significant portion of your total income is already being allocated to repayment of debt. Another loan may make it difficult for you to keep paying your EMIs. Consequently, financial institutions often reject applications from people with a very high debt-to-income ratio or FOIR. To secure a low home loan interest rate loan, borrowers must try and Keep their FOIR below 40%. They can also add all additional sources of income while calculating their total income to increase their FOIR.
Final Words
An affordable home loan is essentially a low-interest-rate loan that’s easy to repay. Other than the tips and tricks mentioned above, availing of an affordable home loan will also be easy if you maintain a low debt-to-income ratio or FOIR alongside a stable income and job, not be excessively dependent on credit, and apply for a home loan with a lender with whom you already have an excellent and long standing relationship. Doing these simple things will make you eligible for a good home loan deal.
