The increasing property prices across India and the desire for better living have meant that there are hardly any working individuals who can afford to buy an apartment without opting for a home loan.Taking a loan for buying a flat is after all not such a bad proposition as you get dual benefit of tax advantage and at the same time do not have to utilize your entire lifetime savings in getting a shelter for yourself.As per the guidelines issued by Reserve Bank of India (RBI), the loan to value ratio (LTV) for home loans of up to 20 lakhs is 90 percent, for home loans from 20 to 75 lakhs is 80 percent, while LTV for housing loans above 75 lakhs is set at 75 percent,proving to be a great help in your home buying process. The only dilemma that you face as a home buyer is whether you should opt for pre-approved home loan or applyfor it once you have your apartment finalized. Opting for a pre-approved home loan is a much better option and it has more advantages than drawbacks. However, all pros and cons related to pre-sanctioned loans should be carefully scrutinized before opting for it.
Advantages of pre-approved home loan
Allows you to plan your finances better
One of the important benefits of these loans is that you get to know your home loan eligibility in advance and can plan your finances better. In case your loan eligibility is lesser than your requirement, you can always add a co-applicant to increase your eligibility.However, it is important to note that all co-applicants should be co-owner of the property. The process of applying for these loans is also easy and most banks and financial institutions enable you to apply home loan online. Once the online application is done, their representative will come to your home to collect the required documents in order to analyze your credit worthiness. The list of documents differs on the basis of your employment, and mandatory documents required to be submitted for salaried individuals are different from self-employed and business owners.
Prevents you from unpleasant surprises
The other reason why pre-approved loans are so important is because they prevent you from getting aftershocks and unpleasant surprises. There is no fear of deal falling through as you already know your loan capability, the equated monthly installments (EMIs) to be paid and the down payment amount that you have to arrange for. You can search your property on the basis of your financial abilities. This goes a long way in expediting your home search process and makes the entire transaction easy, smooth and hassle-free.
Disadvantages of pre-approved home loan
Processing fees is generally non refundable
This could be termed as one potential drawback for pre-sanctioned home loan. However, it must be noted that the processing fees even though non-refundable is a minuscule amount. In addition to this, there are many banks that increase the validity of the pre-approved loan by few months to enable you to purchaseyour home. Also, not all banks charge the processing fee for pre-approved home loan.
Interest rates do not change
The other disadvantage with these loans is that the interest rates are fixed at the time of approval and do not be change if they fall when the loan is actually disbursed. This should not be an issue if you have opted for a floating rate home loan as the interest rates can be adjusted once the amount is released by the bank. http://cash-enavi.com/should-you-apply-for-pre-approved-home-loan/ http://cash-enavi.com/should-you-apply-for-pre-approved-home-loan/ http://cash-enavi.com/should-you-apply-for-pre-approved-home-loan/Also, in India the interest rates are not often changed by RBI in a hurry. So they neither fall norincrease within months and there is anappropriate method that is followed to give the retail customers enough head room to adjust to changing rates.
Conclusion – The pre-approved home loan come loaded with several discounts and benefits and play a key role in making your home buying experience pleasant and satisfying. Like any financial product, they too have their set of drawbacks.However, none of these would pose any major challenge to you and can be easily overcome. It is thus advisable to opt for pre-approved home loan to expedite your property transaction.