- Eyeing a home purchase? Time your application better for a hassle-free experience!
- These include the time when interest rates remain low and when your income is high - Read this for extensive details
Having a house remains on the wishlist of us as it takes us away from the hassles one normally experiences with rented accommodation. But the high price tag of houses these days means some homework for you. You can take a home loan like most do to buy a house. But banks and housing finance companies (HFCs) offer loans upto 75-90% of the property; you will need to arrange the remaining sum. At the same time, the loan can go for a maximum of 30 years. You might like to take it for some 15-20 years, which is a good idea to contain interest payment.
But when should you look to buy a house? Well, whatever time you choose to do this auspicious thing, make sure you keep it simple and don’t burden yourself much. We are here to help you ensure the same. Let’s read and know the right time to buy a house.
So When You Should You Look to Buy a House?
Buying a house remains good when your income is on the higher side, the existing obligations should be either zero or very negligible, interest rates are lower, have the required savings, etc. If you err on these, you could either be ineligible for a home loan or incur more cost. Recognizing that, we have discussed these in detail below.
When Your Income is High to Pay the Home Loan EMI
Applying for a home loan feels easy on your budget when your income is high. As far as current real estate rates go, they can be anywhere around INR 15 lakh to more than a crore. On average, you can find properties within INR 25-60 lakh across different locations in India. So, the Equated Monthly Installment (EMI) will most likely be on the higher side.
To help accommodate the same, your income should be high enough. Else the lender will increase the length of the loan. While this could decrease the EMI and make you go for it, doing so will raise your interest cost way too much.
Lenders disburse the home loan amount based on the property value, but they also check your income before deciding the eligibility. Ideally, they want the proposed EMI to be within 50% of your net monthly income (NMI). But that ratio is subject to change based on the income levels of customers. As a borrower wanting that extra cushion, you could do well to bring the ratio down to 35-40%. That would be possible only if your earnings are quite high.
When Your Existing Debt Obligations are Less to Zero
As a home loan comes with a significant EMI amount, you should either have no debt obligations or very little. Also, lenders would decide the loan amount based on your existing debt obligation. That 50% ratio you saw above would also factor in the obligation. If the proposed home loan EMI and existing obligation together remain within 50% of your NMI, the lender will approve the application. If the obligation is not much, you could manage both debts efficiently.
In case the existing debt obligation keeps your savings at the edge, you could either delay a home loan or look for a property costing less. But when you have only one loan to pay, it feels a lot easier both financially and mentally.
When You Have the Required Savings
Like we said above, home loans are not financed fully; you need to pay something too. That could be quite an amount given that you need to pay around 10-25% of the property cost. Besides, you need to pay for property registration, processing fee, etc. So, your preparation for a home loan should begin some 3-5 years before buying a home. Check the property rates now and estimate your savings with an annual rate hike of 5%.
You could invest in fixed deposits, recurring deposits or even mutual funds to accumulate such an amount. With such savings, you will not only get seamless approval but also won’t have to ask your family and friends for that last-minute help.
When the Home Loan Interest Rate is Low
You should also consider the home loan interest rate when deciding to buy a house. The rate helps decide the EMI that you will pay every month. When the rates are lower, the EMI remains lower for you to pay it easily and on time. Of late, home loan rates have fallen with the lowest rate of most banks being below 7%. Overall, the interest rate remains around 6.90%-8.00% of most lenders. Let’s check the home loan interest rate of top lenders and find the best pick for you.
|Lenders||Interest Rates (In Per Annum)|
|State Bank of India (SBI)||8.05%-8.55%|
|HDFC Limited||8.10% - 9.10%|
|ICICI Bank||8.10% - 8.95%|
|LIC Housing Finance (LIC HFL)||8.00% - 9.25%|
|PNB Housing Finance (PNBHFL)||8.00% - 10.70%|
|Bank of Baroda||7.45% - 8.80%|
|Axis Bank||7.60% - 8.05%|