Owning a home is a big milestone for most Indians. It is also a huge financial responsibility, especially if you have decided to fund your home purchase through a home loan. Navigating the home loan process and ensuring affordability can be tricky, especially for first-time homebuyers. The Government of India has taken up various government initiatives and programs to ensure home purchase affordability, especially for economically weaker sections (EWS) and lower-income groups (LIGs). 

In this article, we discuss simple tips on how to find the most affordable home loan in India. Low housing loan interest rates ensure affordable home loans and hence, the focus is on government schemes that provide loans with low housing loan interest rates, along with straightforward tips to help secure a favourable deal.

Simple Tips on How to Secure an Affordable Home Loan in India 

Credit Linked Subsidy Scheme: The credit-linked subsidy scheme, offered by the Government of India, under the Pradhan Mantri Awaas Yojana provides financial assistance to make buying a home easier. This assistance is provided based on the income category to which the individual belongs. For instance, individuals belonging to the economically weaker sections and the lower-income groups can secure subsidies up to Rs.6 Lakh at up to 6.5% per annum.  Under this category, middle-income groups (MIGs), i.e. individuals with income in the range of Rs. 6 to Rs.12 Lakh can claim home loan tax subsidiary at 4% whereas individuals falling under the MIG-II category, I.e. with income falling under the range Rs.12 to Rs.18 Lakh can secure home loans at an interest subsidy of 3% per annum.

The interest subsidies available to these income groups through the credit-linked Subsidy schemes considerably reduce the cost of borrowing money and make buying a home significantly more affordable. Homebuyers looking for an affordable home can also consider investing in affordable housing projects. These days, many state governments work with builders to create low-cost housing projects through public-private partnerships. In urban areas, redevelopment projects are also equally popular for offering affordable homes. Homebuyers can also secure affordable home loans through these projects. However, if you do not qualify to be included in any of the above-mentioned categories, do not worry. Here are a few simple tips on what you can do to qualify for a low-interest-rate home loan. 

Simple Tips on What You Can Do to Ensure a Low-Interest Rate Home Loan

1. Ensure a Healthy Credit Score: If you want to secure a low-interest-rate affordable home loan, one of the first things you must do is maintain a high credit rating. Your CIBIL score provides a clear indication of your repayment capacity and intent to repay debt on time. A high credit score indicates high repayment capacity and high creditworthiness. Therefore, people with high credit ratings can secure low-interest rate home loans easily and ensure affordability in the long run.
2. Opt for a Low LTV Ratio Loan: The LTV ratio refers to the percentage of your property’s total value that you wish to secure as a loan. High LTV ratio loans include high loan amounts and therefore, are easy to repay. The chances of a loan default are also lower in the case of low LTV ratio loans. Therefore, lenders generally sanction low LTV ratio loans at lower home loan interest rates. 
3. Maintain Stable Income and Employment: Your lenders will consider your income and job stability while deciding the home loan interest rate to be offered to you. Individuals with a stable income and employment can easily secure an affordable loan as they are highly unlikely to miss loan EMIs or default on loan repayment. On the other hand, individuals involved in volatile professions or people who change jobs frequently often find it hard to secure a low home loan interest rate.
4. Consider Prepayments: One of the easiest ways to reduce the housing loan interest rate on your home loan is to make prepayments on your home loan. When you make a prepayment, the principal amount you owe your lender reduces automatically. This, in turn, either causes the loan tenor to shorten or the loan EMIs to come down. In either case, a lower principal would also mean lower home loan EMIs and lower interest payout on the loan. A home loan calculator will help you understand how prepayments will affect your tenor and EMIs. 

Summary

Homebuyers can secure affordable home loans through government schemes like the Credit Linked Subsidy Scheme and other simple strategies, such as maintaining a high credit score, ensuring stable income and job, and making prepayments whenever possible. Loan applicants must also use the home loan calculator for prepayment and repayment planning.