Finance

The Not-So-Frequently Asked Questions About Home Loans

The tax benefits on a home loan, the interest rate, tenures, fees and charges, choice of properties, selection of lender, repayment of EMIs, types of home loans available, types of repayment flexibility offered, etc. are some common questions asked about Kotak Home Loan by prospective homebuyers and borrowers, right?

But more often than not, it’s the not-so-frequently asked questions and doubts that are left unanswered. Wondering which ones, here are some questions which you must understand when thinking of turning your dream of owning a home into a reality. This will give you a better glimpse of the frequently not asked things about them.

When applying for an HSBC Home Loan, what sorts of preventative measures must one take?

The accumulation of an adequate downpayment, the maintenance of an emergency fund with a balance that is at least six times your monthly mandatory expenses, and the evaluation of your ability to afford your EMI by ensuring that your FOIR remains within a range of 50–60 percent (including your new loan’s EMI) are among the essential considerations that one needs to take into account before applying for a mortgage loan. Be sure to check your credit score before submitting an application for a Kotak Home Loan. Your credit score is one of the primary factors that lenders consider when deciding whether or not to approve your loan application, and it also serves as the foundation for determining lending rates in accordance with the risk-based pricing practice. 

If your credit score is on the lower side, the first thing you should do is take remedial steps to gradually increase it, and then you should proceed with your application for a home loan. In addition, given that HSBC Home Loan involves larger loan amounts and longer tenures in comparison to other important financial goals, it would be prudent to obtain an insurance policy to cover the outstanding loan amount in the event of your untimely death. This would ensure that your family would not be burdened with the responsibility of repaying the loan in the event of your passing.

And before you settle on a particular lender, it would be wise to visit an online financial marketplace in order to compare the various offers made by potential banks and HFCs on the basis of your monthly income, credit score, and other factors. This will allow you to select the most appropriate lender according to your loan eligibility.

How much of the handling of HL transactions take place online? What are the benefits of taking HL online as opposed to in a traditional classroom setting?

If you want to obtain an HSBC Home Loan, you could go to different lending institutions’ branches or call a number of lenders directly. However, if you go to an online financial marketplace, you will be able to compare and select from a number of prospective lenders who offer Kotak Home Loan based on your eligibility criteria, such as your monthly income, credit score, and other factors. You have the ability to compare several lenders based on criteria such as interest rate, loan amount, loan term, and processing charge, and then choose the most appropriate one who meets your specific financial needs.

A floating rate that is tied to the repo rate is offered by banks; would borrowers from NBFCs enjoy the same advantage?

The Reserve Bank of India (RBI) issued a directive to banks requiring them to link all newly originated floating rate loans, effective October 1, 2019, to one of four external benchmarks. These benchmarks include the repo rate linked lending rate, the rate on either the 3-month or 6-month treasury bill, or any other benchmark published by FBIL. However, NBFCs, including HFCs, have not yet been mandated to link their floating-rate loans to external benchmarks. The majority of NBFCs, however, have been offering floating rate HSBC Home Loan linked to benchmarks such as the prime lending rate (PLR) or any other benchmark adopted by the respective HFC.

When compared to most HFCs, banks not only have lower interest rates for Kotak Home Loan, which is primarily due to the fact that they have a cheaper source of funds, but they also typically have higher transparency in the rate-setting mechanism and quicker transmission of interest rate changes than most HFCs, especially after being linked to external benchmarks. This is especially true after banks have been linked to the external benchmarks. As a result of this, clients have always favored banks as their primary choice when it comes to obtaining credit. However, because HFCs have a larger degree of freedom in the qualifying criteria that they use when reviewing loan applications, they have progressively increased their share of the market for lending.

Although most public sector banks have been offering the lowest house loan interest rates, which are currently going as low as around 7 percent per annum, not only do they have tight qualifying conditions, but their processing time and disbursal take far longer than private sector banks. Those who are unable to obtain Kotak Home Loan from banks are therefore required to obtain home loans from home finance companies (HFCs), even if doing so requires them to pay higher interest rates. While they are still making payments on their mortgage, they always have the option of transferring the balance of their loan to a bank that offers rates that are lower in the future.

By now, hopefully, you all must have gained better insights into some lesser asked questions surrounding home loans, isn’t it? These will help to boost your understanding and, therefore, eligibility and approval chances for the loan, as you will be financially more clear in mind and well prepared before taking the big step of initiating the process of taking a home loan. Last but not least, a not-so-popular tip to lower your EMI and home loan burden is to accumulate a relatively bigger margin money/down payment. But don’t stretch your finances too far for it, and do not compromise on other important goals too!

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