When you are planning to buy a home, you should always consider the different types of loans available in the market. These loans come with a wide range of advantages, including tax benefits. In addition, the interest rates and repayment tenure are also important factors to take into consideration. Using this knowledge, you can make your decisions easier.
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Co-applicant
If you have a strong credit history and you have good assets, your chances of getting a loan are greater. You might even get a lower interest rate.
Getting a home loan can be a stressful process. You have to fill out an application, get your finances in order, and work with the lender. Adding a co-applicant can simplify things and increase your chances of approval.
In addition to the benefits of a low interest rate, a co-applicant can help to improve your overall approval odds. Your co-applicant may be a spouse, business partner, or a parent.
A co-applicant can also be a great way to reduce the stress of getting a large loan. A co-applicant will be responsible for repayment if your primary borrower fails to pay.
However, you should be careful when choosing a co-applicant. Having a good relationship with your co-applicant is essential. This is to ensure that you will work well together. And you will want to make sure that your co-applicant has the proper credit and financial qualifications to get a loan.
If your co-applicant has a bad credit score, you might be worried that your chances of getting a loan will be diminished. Nonetheless, you can still apply for a co-applicant home loan.
Co-borrowers will need to meet income and debt-to-income ratio requirements. Lenders will look at your co-applicant’s financial history, assets, and income to ensure that you have the ability to repay your loan.
In addition to helping to improve your chances of approval, a co-applicant can also increase the size of your loan. Some lenders will allow you to increase your principal amount or offer you a lower interest rate.
CIBIL score
The CIBIL score is one of the most important factors in home loan eligibility. A high score can increase your chances of approval and reduce your interest rate. However, if you have a low score, there are still ways to get approved.
One way to improve your CIBIL score is to prepay your debt. This means paying off all your outstanding dues before the repayment period ends. Not only will this help your credit, but it will also raise your CIBIL score.
You may also consider using a guarantor to secure your loan. This is particularly helpful if you have a low CIBIL score. It’s also a good idea to check your credit report for errors. That way you’ll know if there are any omissions that could hurt your chances of getting approved.
Another great way to raise your CIBIL score is to keep your credit mix as balanced as possible. Maintaining a ratio of 30-40 percent between unsecured and secured forms of credit can be helpful.
You can also boost your CIBIL score by keeping your EMIs on time. Late EMI payments will make your score fall and cause you to pay more in interest.
Finally, make sure that you don’t apply for several loans in a short span of time. Using multiple credit cards or applying for many loans in a short period of time can shave off your CIBIL score.
Generally, a CIBIL score of 700 is considered to be a reasonable score for getting a home loan. Your score may differ from lender to lender, so you should check with various financial institutions before applying.
Although there is no set standard for a CIBIL score, lenders usually give more preference to a score in the 600s than a lower score.
Interest rate
Getting a home loan can be a big commitment. It can take up to fifteen years to pay off. In order to make it more affordable, it is important to get a good interest rate. With some planning, you can reduce your monthly expenses and own your own home sooner.
There are three variables that influence your EMI. These are your annual income, your interest spread and the tenure of your loan. When one of these changes, your EMI will change.
Your income is a good indicator of how favorable your home loan will be. A higher income means a more attractive interest rate. But if your yearly net income is less than what is required to qualify for a home loan, you could be paying more than you need to.
Changing your home loan’s interest spread can lower your interest rate and save you money. The best way to do this is to find a lender that will convert your current home loan to a new one with a lower interest rate. If your bank offers this service, you may be able to save up to 50% of your monthly income.
Alternatively, you could refinance your existing loan to another lender. This requires you to undergo a loan appraisal process. You will be charged a fee for this. Depending on the amount you wish to refinance, the conversion rate can be between 0.50% and 1% of your loan balance.
If you do not want to pay the fee, you can also lower your interest rate by prepaying your home loan. Prepayment can be done by either transferring the outstanding balance of the loan to another bank or by making a balloon payment.
Repayment tenure
Choosing the right repayment tenure for your home loan is an important decision. You need to weigh various factors before making this decision.
One of the key factors that must be considered is your age. If you are younger, you can choose a shorter loan tenure. But if you are older, you can opt for a longer loan. However, you will have to pay higher interest.
Another consideration is your monthly income. Short-term loans are better suited for people with large incomes. A short-term loan allows you to get a property in your name quickly. In addition, it will help you to pay off your debt quicker.
While choosing a loan, you must consider the EMIs. Your monthly installments include interest as well as the principal on your loan. The total amount paid in a month will be a good indicator of how long you will have to repay your home loan.
It is also a good idea to consider your goals. If you are trying to pay off your home loan quickly, you will want to opt for a short-term loan. On the other hand, if you have significant debt, you will have to make a long-term loan repayment.
A home loan EMI calculator will help you determine the appropriate tenure for your home loan. This is a key deciding factor for your overall interest outlay. When you have selected the optimum tenure, you will be able to keep your EMIs under control.
There are other factors to consider, such as tax advantages. Although these benefits can be favourable, it is a good idea to avoid taking out more credit than you need.
Tax benefits
If you are planning to buy a new residential house or renovate your existing home, there are certain tax benefits available for you. These benefits can help you save money and reduce your taxable income. There are a few requirements to qualify for these tax benefits.
The first requirement is that you need to be a co-owner of the property. This can be a wife, husband, mother or father. As long as the borrower is a co-owner of the property, he or she can claim the deductions. However, if the co-owner is not a borrower, he or she will not be eligible to claim the home loan tax benefits.
Besides being a co-owner, the property must also be in joint names. This is important as the benefits will be divided amongst the co-owners according to their share. It is essential to clearly mention the ownership ratio in the home sharing agreement.
Another rule for claiming tax benefits is that the value of the property must not exceed Rs. 45 lakhs. In addition to that, the construction of the property for which the loan is taken must be complete. Until the construction is completed, the benefit cannot be claimed.
You can also avail the tax benefits if you rent out your property. This is not applicable to under-construction properties. After the construction is complete, you can claim the deductions.
Similarly, the interest paid on the loan can be claimed as a deduction under Section 80C of the Income Tax Act, 1961. For the purpose, the bank should issue you a certificate. You can submit this certificate to your employer for the benefit.
If you are a first time home buyer, you can also get additional tax benefits. You can claim a tax rebate of up to Rs. 1.5 lakh if you are buying a self-occupied house, and up to Rs. 2 lakh if you are renting out a let-out house.
