5 Tips to Get a Home Loan in India

You’re finally in that sweet spot in your life where you have sufficient financial stability to take the next big step – buy a home that you can call your own. But after a cursory glance at the Home Loan options available online, your mind is boggled over the big question – how to get a suitable home loan? Simple! Go over these savvy strategies and keep them in mind to make an informed decision. 

Essential Home Loan Tips for Borrowers

With these key tricks of the trade, you can ensure that your home loan journey is fast and hassle-free – 

1. Assess Your Financial Health

Gauge your financial fitness first. Take a moment to survey your savings. Measure your monthly income and identify how much you can confidently set aside for your home loan EMIs after paying all your monthly bills and liabilities. This will help you make a wise decision and apply for a home loan that aligns with your financial stamina.  

Moreover, if you are taking a home loan with a joint applicant, you can benefit from several tax benefits under Sections 80C, 80EE, and 24(b) of the Income Tax Act, 1961. This further reduces your home loan liability. 

2. Do Your Homework

Before you even think about dipping your toes into the deep waters of the housing finance market, take some time and do your research. Decide your home loan EMIs carefully, so that they don't become a financial burden. Calculate them in proportion to your income to ensure a smooth repayment journey.

Remember, interest rates are the trump card here. For better advantage, use a home loan EMI calculator to compare different interest rates, tenures, and terms and adjust the loan amount and interest rate to fit within your budget. 

Remember that longer tenures lead to lower EMIs, but you end up paying more interest in the long run. On the flip side, choosing shorter tenures equal higher monthly EMIs but less overall interest. 

Related: What Happens When You are Unable to Pay Your Home Loan

4. Look for Government Schemes

The Indian Government has an arsenal of programmes that can lend you a helping hand in your house-funding quest. One of the most popular of these schemes is the Pradhan Mantri Awas Yojana (PMAY). Launched in 2015, this initiative is the Government’s attempt to bridge the urban housing gap especially in underprivileged sections of society. 

As a first-time homebuyer, you should also check out the Credit Linked Subsidy Scheme (CLSS). This scheme, part of PMAY, offers subsidies on interest rates, subject to certain conditions. Make sure to thoroughly check the eligibility criteria and benefits of such schemes to ease your lending burden. 

To learn more also check out: Here's What You Should Know about Repo-linked Home Loans

5. Crack the Credit Code

Remember how in school you’d pore over your report card to know if you will get promoted? The same applies for your finances, where your credit report plays the same key role. A good credit score is your ticket to lower interest rates and faster loan approval and disbursal. 

Aim for a score above 650 to secure a favourable interest rate and quick loan approval. If your credit score is not up to the mark, clear your credit card dues, pay your EMIs and bills on time, and avoid defaulting on other payments. You can even check your credit score for free here! 

Home Loan Tax Benefits to Keep in Mind

If you're a first-time home buyer, there are some sweet tax benefits waiting for you as per the Income Tax (I-T) Act, 1961. Let’s look at these as an example. 

Meet Aditya, a salaried individual with an annual income of ₹6 Lakhs. He takes a home loan to buy a house. Let's walk him through the various tax benefits he can claim from his home loan – 

• Interest Payment: For a self-occupied property, Aditya can claim a deduction of up to ₹2 Lakhs p.a. on the interest he pays, under Section 24 of the I-T Act. If he pays ₹3 Lakhs interest in a year, he can reduce his taxable income by ₹2 Lakhs. 

• Principal Repayment: In addition to interest, Aditya can claim a deduction up to ₹1.5 Lakhs p.a. under Section 80C. If his annual principal repayment amounts to ₹1.8 Lakhs, he can reduce his taxable income by ₹1.5 Lakhs. 

• Registration Charges & Stamp Duty: When Aditya registers his property, the registration charges and stamp duty he will have to pay are eligible for deductions of up to ₹1.5 Lakhs under Section 80C. 

• Home Loan Interest Rate Deductions: Suppose the interest rate on Aditya’s home loan is 7%, amounting to ₹60,000 in annual interest payment. He can claim a deduction of up to ₹50,000 annually under Section 80EE, so only ₹10,000 contributes to his taxable income. 

And there you have it! Armed with these tips, you can prepare yourself well in advance to tackle various obstacles on your exciting journey. Once you are ready to take the first step to homeownership, head over to Bajaj Markets and explore the various loan amounts, rates, and tenures offered by a wide range of leading financiers.