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First and foremost, the affordability factor has to be taken into account. As the investment in a home does not yield any monthly income, the ability to repay the loan depends entirely on salary or regular income from a stable business. Most finance companies finance upto a maximum of 85% of the cost of the house and monthly repayments are usually less than 35-50% of the customer's gross monthly salary.
Choosing the lending institution is another vital step. It is imperative to choose the financer with utmost care and proper consideration of its past track record. Apart from the housing finance companies, most of the major nationalized banks have forayed into the home loan segment.
Another important consideration in choosing home loans is the tax bracket as housing loans are one of the best ways to avail tax benefits. The tax breaks are directly related to the level of interest and principal repayments made each year, with an over all upper limit. One may not qualify for the full tax break if one's loan is relatively small.
Interest rate is undoubtedly one of the most important parameters to factor into one's calculations. In fixed interest rates, the rate of interest remains unchanged for the entire duration of the loan while in floating rates, interest rates change every time the interest rate in the financial system change.
