The mortgage loan gives you the opportunity to own a residential property and take advantage of tax benefits. It helps you build an asset that you can use for multiple purposes. However, before you take out a home loan, you should review your budget and set aside money for a down payment, which is about 10 to 20 percent of the total cost of ownership.

Once you have the money for a down payment and select the property, you can apply for a home loan. The loan must be repaid in a fixed period. You can take advantage of income tax benefits for the principal amount of the loan and the interest repayment.

Let’s look at some things to consider before applying for a mortgage loan.

Borrow what you can pay

You should borrow only the amount you can repay through equal monthly installments (EMI). A mortgage loan is a long-term commitment. You don’t want to miss out on an EMI or default on your loan entirely because of unaffordable loan EMIs. Banks often allow EMI up to 40% of your net loan salary.

Also read: Taking out a joint mortgage loan? Check its pros and cons first

apply what you need

You need to know your eligibility because if you apply for a large amount that you are not eligible for, your loan could be denied. Once you know your eligibility for the loan, it will be easy for you to organize the money for a down payment.

Loan from an existing lender

It is often recommended to borrow from the lender who already has an existing relationship. It helps to process your loan quickly since the bank already knows your credit history and personal data and it can take less time to disburse your loan.

Make the most of a good credit score

Banks often prefer to make loans to customers with a good payment history and credit rating. A high credit score helps you get approved and disbursed faster. Banks can also lower interest rates for customers with high credit scores.

Check Property Approvals

It is essential to check the legal approvals of the project/property you are buying. You must have all the regular and environmental clearances to avoid a later dispute. Also check if the banks have approved the project for loans. Helps in faster loan application approvals.

Borrow jointly for a larger loan

If you need a larger loan but your income doesn’t allow it, you may want to consider taking out a joint home loan with your spouse/parents or siblings. You can also apply for a long-term loan. Your EMI will be lower but your interest will be higher. Avoid making a decision in haste and consider all the points before signing the loan agreement.

The table below will help you compare the interest rates of around 15 banks and the EMIs for a loan of Rs 50-lakh for a period of 20 years. You can compare and borrow based on your eligibility and requirements.

Interest rates and EMI on mortgage loans

Compiled by BankBazaar.com

Note: The interest rate on mortgage loans for all public and private listed banks (BSE) (excluding small finance banks), which are listed on their website, are considered for the data compilation as of November 9, 2022. The top 15 banks offering the lowest interest are listed in ascending order based on interest rate, i.e. the bank offering the lowest interest rate on a home loan (lowest rate regardless of the loan amount and duration) is placed at the top and the highest at the bottom. The table considers the lowest rate offered by banks. EMI is calculated based on the interest rate mentioned in the table for loans of Rs 50 lakh with a duration of 20 years (processing charges and other charges are assumed to be zero for EMI calculation); *NBFC Entity.

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