10 tips to get the best home loan offer

There are as many as 50+ lenders in India who will be willing to give you a Home Loan. But whom should you choose? Do not tread the easy way of taking it from whosoever arrives first.

Here are 5 most important things you should ask the home loan lender to ensure that you get the best home loan offer:

1. Do not chase the cheapest rate of interest. Find out a competitive rate and focus on the other aspects of the loan. Cheapest is not the best deal so look beyond it.

2. Choose a floating rate of interest over fixed, even if the latter has an attractive rate offer. There will be twists in fixed products. Many of you miss to note that there's a foreclosure penalty applicable within the fixed term. And moreover, the margin changes after the fixed period is over, if the offer rate was for teaser period.

3. Ensure you opt for a lender who offers daily reducing balance and not monthly. It will not make any difference unless you plan a partial repayment. In a monthly reducing balance plan, even if you partially close an amount in between two EMI dates, they consider the repayment only from the next EMI date, thus making you pay interest even on the repaid sum for those days! You will not know, but it will cost you heavy.

4. Do not get biased by your previous experience with another product, or what your friends, relatives & colleagues. This is finance, a pure mathematical product, so do your maths & decide accordingly.

5. Read all online remarks, which you will anyways do. But 99% of them are otherwise motivated. You will find that those who are badmouthing a lender probably use funny dummy ID-s like kingpin, lisahayden, bigboy, greatguns, etc. So before taking their comments seriously have a look at the IDs they’ve used.

6. Your wealth manager, bank relationship manager, chartered accountant, tax-planner and your finance controller or CFO in office are great. Seek their guidance to reach the right mortgage broker. Mortgage is a specialised product. Have you ever heard a heart surgeon treating patients for skin rashes? Similarly, a mortgage broker selling mutual fund and insurance will be as good as a real estate broker selling tour-tickets and running an STD shop with photocopy machine! Therefore, chose the best in industry.

7. Try opting for a new-age product which saves you money. Standard vanilla home loan are cliche' and won't work for most of my clients who have surplus funds and taking the loan for tax-savings or waiting another property to be sold and pay off their debts. These days, borrowers have various requirement rather than just borrowing for the need of money.

8. Look at the service perspective carefully; you are getting into a long-term relationship. Don't jump on the first lender approaching you or the lowest rate of interest or may be, what your friend's father suggests. You will need a lot of services like- tax certificates, provisional amortisation, list of documents, part closure services, reduction in the tenure/EMI upon partial repayment. If you are going to continue a loan for a long term, there may be a requirement of change of address if as you may shift from one city or country to another. Therefore, never compromise on the aspect of post-sales service.

9. Always ask for a comparison between at least 6 major lenders from your mortgage adviser. And again, do not decide on basis of the lowest rate. Look at the base rate, the margin offered, whether any other product is being pushed, how many times the lender has reduced rate in past two years, what is the maximum tenure offered, and how is the eligibility calculated and most importantly whether a property similar to yours has been funded by this lender earlier.

10. Time taken for processing the loan. This may sound unimportant, but my noting it last doesn't indicate that at all. When the builder starts sending you delay-penalty notices or the seller withdraws from the deal or increases the sale value, trust me, this becomes the top priority on the chart. What will be the point of checking out so many lenders and settling for the one who can only offer, but cannot execute?
(Image: Thinkstock)

(About the author: This article has been contributed by Sukanya Kumar, founder and director of RetailLending.com.)
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