Importance Of Home Loan Rates In Your Monthly Cash Flow

Author: aishwaryamahurkar

EMI calculators calculate the EMIs based on three factors; the principal amount, the housing loan interest rate and the loan tenure. Out of these, the home loan rate is the most important one, as it is the only factor that can vary after you have started paying off the EMIs. Whether you have a floating or a fixed home loan rate , it will be based on the RBI rules and regulations, the profit margins and economy variables as well.  

Due to the various financial challenges, it is likely for your EMIs to become the biggest deduction from your monthly earnings. This can be hazardous to your financial life for two reasons:

1.    You may not have sufficient funds set aside for emergencies due to which you may end up losing your home because of the additional expenses.  

2.    Any external factor like a raise in the home loan rates in India  can affect regular monthly payments such as EMIs, utility bills, grocery purchases and insurance payments. At times, it can imply that you won't have sufficient savings for any other financial or medical emergencies. 

If you understand the impact of the potential growth in home loan rates, you must ensure that your EMIs account for less than 30% of your monthly income. This will help to make certain that any possible increase in the housing loan interest rates can be dealt with easily.

It can be challenging to keep this percentage consistent throughout the term of your loan repayment though. However, it is the most strongly advised course of action. Fundamentally, there are two strategies that can help you get there:

  

1.    You can work towards an increase in salary or your monthly business turnover, to stay ahead of this ratio.  

2.    You should make significant low-risk-higher-liquidity investments with whatever funds are left after all the expenses.  

The most suitable type of investments for this purpose include SIPs in balanced or gold mutual funds, fixed deposits, recurring deposits, and gold and blue chip equities from stock market. These are realistic as they offer the right combination of liquidity and rewards. You can use them if you get into a situation where you can't depend on your salary or business turnover to pay your EMIs. First time borrowers believe that home loans are about making the repayments by the set date. However, if you ask any financial expert, they would tell you that it's much more about the financial discipline of setting enough money aside.

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About the Author

The author is a seasonal writer on topics of finance and the housing finance sector. Through her writing, she articulates aspects that are important to people availing home loan facility such as home loan interest rates, documents, eligibility criteria that help to make the best decision.

Women Enjoy Lower Home Loan Rates In India

Author: aishwaryamahurkar

Most banks and finance companies have identified women as the next target group that they want to reach out to. While each organization has its own strategy, the common idea is to offer a discount on home loan rates to women , where a woman is:

•    The sole applicant or co-applicant in the home loan

•    Sole home owner or first home owner in case of joint ownership

The discount provided to the borrower with respect to the home loan rates varies with each bank or finance company. Overall though, this trend is on the rise. Female customers keen on lower housing loan interest rates can change a few details in their home ownership and loan application, and then contact organizations that are primarily driving this trend. It is expected that other organizations will be picking it up soon too. Adding to the appeal, many banks and finance companies are also presenting the great value-add-ons to their home loan products such as additional discount in the processing charges.

The main cause of concern for borrowers here, though, is that these organizations claim this discount trend as a limited time offer for new home loan applicants. So, you cannot avail this particular offer unless you apply for it in the specific time frame. 

Why are these lenders offering discount in home loan interest rates , if others in India are not offering it as a regular practice? It is believed that the last quarter of the financial year might be the reason for this opportunity. Most organizations may have a lower credit growth than expected. Plus, the non-performing assets (NPA) may seem to grow. So, lenders want to strengthen their retail lending by offering this chance to women; who associate high-value to their homes and are consistent in their repayments. 

This strategy allows women and their families to avail a home loan at much lower rates and lenders can also tap into the target audience which is dependable when it comes to their repayments.  

  

Overall, this discount can be used well by the female customers to expand their real estate portfolio or to buy a home for the family. The time-constraints, however, imply that if you don't have a seller, required documentation and a good credit history in place, this discount may not be as rewarding. This is because the lenders will check your repayment ability and other documents before considering you for this loan.

Article Source: 

About the Author

The author is a seasonal writer on topics of finance and the housing finance sector. Through her writing, she articulates aspects that are important to people availing home loan facility such as home loan interest rates, documents, eligibility criteria that help to make the best decision.