Wednesday, 15 May 2019

Financing Your Home in an Urban Area is now Feasible with a Home loan

Posted by MyInvestmentsPub
(Published on 15-May-2019)
For want of better job opportunities and better education, families are increasingly shifting to bigger cities. However, living on rent forever cannot be a feasible option in the long run. The next best alternative is to own a house. But house prices are sky-rocketing, leading to a shortage of housing in urban areas for quite some time now. Not everyone is able to afford a house of their own. To tackle the housing shortage in urban areas, especially among the lower and middle-income segments, credit availability on feasible terms and affordable rates is important. The government and financial institutions have been trying to implement that from time to time.

Financing your home in an urban area is now feasible with a home loan

Availability of institutional credit in form of home loans in urban areas is very important to fight the shortage of housing among this major segment of the population. The announcement of the Urban Housing Fund in the Union Budget 2013-14, whereby the Hon'ble Finance Minister proposed to allocate Rs. 2,000 crore to the National Housing Bank (NHB) is therefore of great importance. This fund would be used to refinance banks and housing finance companies so that they can lend it out as home loans to people, who want to buy a house in urban areas. The scheme aims to enhance credit availability, and meet home loan needs of the middle-class and the lower middle class. 

Home Loan Interest Rates

 Accordingly, institutions such as Tata Capital are offering home loans at very affordable home loan interest rates starting from 9.05%. With a home loan, you can buy a plot of land or property and construct a new house on it. You can even buy an already constructed ready-made house or apartment with a home loan. If you already own a place, but that’s too small for your family needs, you can even use the home loan to add a new built-up area to your existing house. And last but not the least, if you are staying in a very old and dilapidated house that needs immediate repairing, you can even take a home loan and undertake repair and renovation work for your house.

Home loan interest rates are different for different classes of borrowers. For salaried and self-employed professionals, the home loan interest rate is 9.05% for a loan amount up to Rs 30 lakh. If the loan amount exceeds Rs 30 lakh, then the interest rate hikes up by 0.15%. If you are a self-employed non-professional, you will be charged 9.20% home loan interest rate for a loan amount up to Rs 30 lakh. For loan amount exceeding Rs 30 lakh, the home loan interest rate will increase by 0.25%. For women applicants or co-applicants, the rates offered are 0.05bps lower across categories.

Who Are Eligible for Urban Home Loans?

Salaried individuals working in reputed companies are eligible for a home loan. You can even apply for a home loan if you are a self-employed professional or non-professional. You have to be above 24 years of age and within 65 years of age to be eligible for a home loan. Institutions such as Tata Capital give a minimum home loan amount of Rs 2 Lakh and a maximum home loan of Rs 10 Crores, subject to 80% of the market value of the property. 

Various Factors Deciding Home Loans:

Understanding the application of the home loan interest rate is important. Firstly, the home loan interest rate depends on a variety of factors starting from your credit score, the tenure of the loan, and whether you opt for a fixed or floating rate of interest. Next, considering the repayment happens in the form of EMIs, each EMI comprises a principal component and an interest component. When an EMI is paid for a particular month, the next month's EMI is calculated on the principal outstanding on your home loan, after deducting the previous month's principal component. This calculation is done for the entire duration of the home loan period. So, what happens is, in the initial years of the home loan repayment period, your EMI would have a larger component of interest payment and a smaller component of principal repayment. In the later stages of the tenure, it would have a larger component of principal repayment and smaller component of interest. It will be uniformly balanced and calculated, and your EMI will be the same throughout the duration of repayment. 


Thanks to these exciting home loan options that are being offered by various banks and financial institutions such as Tata Capital, keeping in mind the sentiments of the government, which calls for housing for all, more and more people are able to realize their dreams, and are being able to afford to have spaces of their own in urban areas.

1 comment:

  1. Hey, nice post Ravi sir. I have gone through the article and found it relevant to the current trend. It was quite interesting topic on how to buy a home in urban area. Your article helped me out with some pointers. As I am a regular reader of such posts I have gone through many articles and founded some to be very helpful for others. On some other blog, I have read about how a first time home buyer help themselves to buy a home, i found it useful and wanted to share here as many can take the benefit from it .