Home loans are low-interest rate and long-tenor loans that help loan borrowers stay liquid while also enjoying reduced yearly tax liability through home loan tax benefits. However, a home loan is a long-term financial commitment that requires one to be financially disciplined. Availability of an affordable home loan can make the loan repayment journey easier.
What is an Affordable Home Loan?
One of the priorities of the government of India is ensuring housing remains affordable for all. To this end, the central government as well as the state governments keep releasing schemes that grant loans to potential homebuyers at highly discounted housing loan interest rates, thereby making the process of loan repayment much easier and simpler. Pradhan Mantri Awas Yojana (PMAY) and Credit-linked Subsidy Scheme (CLSS) are popular affordable housing loan schemes run by the central government. Over and above this, state government bodies, such as the Maharashtra Housing and Area Development Authority (MHADA), Delhi Development Authority (DDA), Tamil Nadu Housing Board ( TNHB), Karnataka Housing Board (KHB), Goa Housing Board (GHB), etc., also keep coming up with affordable housing schemes to help make housing affordable to all sections of the society.
Benefits of Affordable Housing Finance
Here are some benefits associated with affordable housing finance:
- The biggest benefit that affordable housing finance offers is that it breaks the barrier to homeownership, making the dream of becoming a homeowner a possible reality.
- Affordable home loans are low home loan interest rate loans. The low interest rate chargeable not only makes loan repayment easy but also reduces the cost of borrowing funds, in turn leading to a better return on investment over time.
- Lastly, affordable home loan make it possible for people from lower-income groups to improve their living conditions and get access to a better quality of life.
Affordable home loans are not accessible to all. Central and state governments extend these loans only to lower-income groups and in some cases, middle-income groups. However, if you do not qualify for an affordable home loan, do not worry. There are many other things that borrowers can do to secure an affordable and low-cost home loan.
Tips on How to Secure an Affordable Home Loan
- One of the first things you must do if you want to secure an affordable home loan is use a home loan calculator to calculate the loan amount you qualify for based on your income, current existing obligations, etc. Applying for a loan amount you are eligible for and can easily repay will allow you to convince your lender of your ability to repay the loan without defaulting, thereby encouraging them to extend you the loan on the best possible loan terms and conditions, including the lowest interest rates possible. So, if you are planning to go ahead with a home loan, make sure to use free-to-use online tools, such as the home loan EMI calculator and the home loan eligibility calculator, to enhance your chances of securing the loan on the most profitable loan terms and conditions.
- Maintaining a high CIBIL score will greatly work in your favour. Individuals with high CIBIL scores are creditworthy people with a very responsible attitude towards credit and its repayment. Such individuals rarely default on loan repayment and consequently, such individuals are also able to easily negotiate for low home loan interest rates and affordable home loans. Building a high CIBIL score is fairly easy if you build the habit of paying all your loan EMIs and credit card bills on time and not being excessively dependent on debt. Securing a combination of both secured and unsecured loans also helps build a strong CIBIL score.
- Maintaining job and income stability will go a long way in helping you secure a loan on low home loan interest rates. People with stable jobs and stable incomes rarely default on loan repayment and are therefore extended loans on better terms.
Lastly, to secure a home loan on low interest rates and other beneficial loan terms and conditions, you must maintain a low debt-to-income ratio. The debt-to-income ratio is the ratio of the percentage of your income going towards the repayment of debt. A high debt-to-income ratio indicates low repayment capacity. To secure an affordable home loan, you must not let your debt-to-income ratio exceed 40%.
