Suggestions for Choosing the Best Mortgage Loan for Youby Tushar Singh Investment Banker
Mortgage loan is another name for loan against property and is availed by mortgaging property. Both salaried and self-employed individuals can apply for a mortgage loan. The age of the applicant should be between 21 years to 65 years. You can get a loan against property for a period ranging up to 15 years. The amount of loan you are eligible for depends upon the type of property. Lenders apply an LTV of 60% to 70%, which means you can get a loan amount of 60% to 70% of property value. Following tips will help you in choosing the best mortgage loan:
Interest rate is the premium you pay for using lenders money. Mortgage loans are available at fixed and floating interest rates. Fixed rates are slightly higher as compared to floating rate loans. Fixed interest rate remains constant throughout the tenure of loan and floating interest rates change in response to changes in MCLR and PLR rates of banks or NBFCs. So, before applying for a loan check and compare interest rate offers of different lenders through online aggregators and choose one matching your affordability.
Your credit score is crucial at the time of obtaining any loan. Lenders check your credit score to assess your loan repayment capacity. So if you are looking for a mortgage loan, then you must first review your credit score. A lower credit score may make it difficult for you to apply with the lender of your choice. So, if your credit score is poor you should first try and improve it before applying for a loan, or else your application may be rejected.
EMI and Tenure
EMI consists of principal amount and interest payment. You can use online EMI calculator to compare and calculate your prospective EMIs of different loan amounts. If you find that EMI is not affordable or pocket-friendly then you can increase the tenure. Tenure varies inversely with EMI. Increasing loan tenure will reduce your monthly EMI.
Loan to Value Ratio (LTV)
In order to get the best deal, when you apply for a mortgage loan, it is important you compare LTV of different banks. Bank apply LTV to determine the maximum amount of loan you can avail. Usually, banks give an LTV of 60% to 70%, which implies you can get a maximum loan amount of 60%-70% of property value. LTV depends upon various factors like type of property, bank's property evaluation method used etc. So, always check for LTV applicable before choosing the lender.
Processing Fee and Part Pre-payment Charges
Lenders charge processing fee when you apply for a loan. In case, you decide to pay a part of your outstanding loan amount during the tenure, then charges are applicable to it, which are referred to as part pre-payment charges. Processing fee and part pre-payment charges vary for different lenders. So, before applying for a loan always compare processing fee and different charges applicable. You can also negotiate with the lender before applying. After comparing and negotiating, choose whichever is lower.
Lock-in period refers to a period before which you are not allowed to transfer, part pre-pay or close your loan. Different lenders have a different lock-in period. Always choose a loan with no or minimum lock-in period. As it helps you in saving on interest at later stage.
In addition to above mentioned things, check eligibility criteria, documents required and time taken to process an application through different online aggregators and then apply for a mortgage loan. If you follow tips given above, you'll be able to decide best mortgage loan option for you.
Created on Oct 4th 2018 04:55. Viewed 660 times.