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Don't Forget These Things Before Applying for Home Construction Loan

Don't Forget These Things Before Applying for Home Construction Loan

Home loans are a popular form of credit that has assisted numerous individuals in constructing or purchasing their own homes. The compounded annual growth rate of the housing credit industry in India is supposed to reach 18% mark by the end of this financial year. Almost 44% of this growth rate can be attributed to non-banking financial companies (NBFCs).

Repayment-friendly home construction loans offered by such NBFCs have not only assisted borrowers but have also proved to be an adequate impetus to the real estate sector as well.

If you are planning to avail a home loan for construction or purchasing an apartment, you must keep the following pointers in mind. These will help you to navigate smoothly through the process and help you make an informed decision regarding the loan.

  1. Know Your Eligibility- If you are applying for a home loan, you must be aware of the maximum amount of home loan you can avail corresponding to your income. If you ask for an amount that is higher than your eligibility, chances are, the application for your home construction loan will be denied. You can use an online home loan eligibility calculator to determine the maximum loan amount you can avail.

  2. CIBIL Score- Lenders prefer applicants with a CIBIL score of 750 and above. You should check your CIBIL score for a home loan before applying. If your score is lower than 750, you must take the necessary steps to improve your CIBIL score.

  3. Compare Interest Rates- This will help you save a lot of money on interest payments. Different lenders charge different interest rates. Before choosing a lender, you must compare the construction loan interest rates provided by different lending institutions to minimize your cost of the loan.

  4. Choose the Tenure of Loan Wisely- The tenure that you opt for determines the cost of your loan. You must understand that a longer tenure means you have to pay more interest on the principal amount. Alternatively, if you choose a shorter tenure for your loan, the EMI amount will be higher, but you will be able to save a lot on the cost of your borrowed funds. You can use an EMI calculator to determine the amount of EMI you will have to pay for different tenures.

  5. Comparison of Additional Charges- Home loans entail various additional charges like processing fees, part prepayment, and foreclosure penalty, administrative charges etc. If you compare these charges from different lenders, you will be able to zero in on the one that levies lower fees compared to others.

  6. PMAY CLSS- Pradhan Mantri Awas Yojana (PMAY) is a credit-linked subsidy scheme (CLSS) initiated by the government of India in 2015. Learn the benefits PMAY that’ll help you become a homeowner.

  7. Look for a Borrower-Friendly Lender- To maximize the value of your loan, you must choose a lender that provides funds with borrower-friendly features like minimum additional charges, home loan transfer facilities, top-up loans etc.

Few Additional Facts About Home Construction Loan

  • The disbursement process of these loans happens in 2- 5 installments. It means that the whole loan amount is not offered to you in a lump sum. The amount of each installment depends on the progress of construction work.

  • The lending authority typically does not cover any additional expenses outside of the pre-approved construction plan. Therefore, you must keep your additional expenses in check to avoid incurring extra cost on construction.

  • Interior works like wiring, plumbing, painting etc. are generally not covered by your home construction loan.

For best terms on your home loan, choose a lender that will provide you with the best value for your hard-earned money. Bring your dream of building a house to fruition with these credits.

Also Read: Construction Loans Are The Best Ways To Build Your Dream Home

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