There are 5 gates to be crossed before you get your home loan. The bank loan application, credit review, legal and technical evaluation, sanction and finally disbursement. Each of these gates can cost you a lot of time and money, or stop you entirely. 9 out of 10 customers will face issues regarding incomplete or incorrectly filled documentation, mismatched lenders based on profile or loan requirements, and suboptimal choice or evaluation of loan type, amount or terms. That means 9 out of 10 customers will face significant delays as they navigate this process, commit a lot of extra expenditure, or find they are ineligible or rejected, which further hurts their chances of getting a loan in the future.
On the other hand, if done right, each of these are opportunities to save a lot of money on your home loan. At mymoneykarma, we’re here to help you do it right. We do this in 2 ways. First, there are many paths to getting a home loan. Most of these paths are dead ends, others are highly inefficient and costly. We identify the most streamlined and cost-effective path. This guarantees you will get on the other side. Moreover you will get there in the fastest and cheapest way possible. Second, We partner with the gatekeepers so that they open for you without any hassles.
Banks follow a simple checklist to evaluate your application and profile to determine your eligibility, interest rate, and loan amount. The key factors are your credit score, your income stability and amount, your outstanding loans, and your type of property. Any credit score lower than 600 significantly hurts your chances of getting a loan and reduces the pool of lenders who are willing to underwrite your loan. A stable salaried employment, especially with a good track record of experience, puts you in good standing, while your salary amount determines not only whether you’re eligible for a loan, but also how much of a loan you can get.
Finally, the type of home determines the risk assessment of your loan, with constructed properties that are large apartment complexes by grade-A builders representing a low-risk prospect for banks and likely to go through the process with relative ease. On the other hand, under-construction properties, especially those without all the necessary paperwork, will face more scrutiny and reluctance from banks, reflecting in eligibility, loan amount and interest rates.
There are 5 ways to get the cheapest home loan in the market. The first starts long before you even decide to get a home loan, or buy a home. It involves building a solid credit history so your credit score is healthy. This ensures that the interest rates charged on your loan will be as low as possible since banks don’t see you as a liability. Second, when you’re in the market for a new home loan, you need to shop around and see competitive rates from different banks and NBFCs. First time home buyers tend to go with the first bank they speak to, usually the bank with whom they already have an account. This is unlikely to be the cheapest rate in the market.
Third, make sure your home loan is personalized to match your profile. Every borrower is different in terms of type of property, income sources, salary, credit score, housing market price etc. If your home loan is generic, it is likely to be more expensive than one that is tailored keeping in mind your specific profile. Improperly matching your home loan needs with the wrong bank can cause delays, rejections and interest rate increases. Fourth, execute your home loan process smartly and efficiently. Home loans are notoriously complex and time-consuming. Applicants may spend months going through this process, losing money in the process through lost work time, paid due diligence and housing price increases. After spending many weeks going through the stages of the process, your application may be rejected at any stage, causing additional losses and a hit on your credit score.
Fifth and most importantly, the cheapest home loan is one that continuously saves you money over the entire tenure of the loan, not just in the negotiation phase before you sign your contract. Interest rates in the market fluctuate. When they drop below what you are paying, you are passively losing money on every single EMI payment. The solution is to keep track of interest rates in the market and refinance your loan when an opportunity comes up to decrease your home loan interest rate. mymoneykarma has a package solution that does all of these 5 steps to ensure you get the cheapest home loan in the market.
There are a large number of documents required for any home loan application. At each of the 5 stages of the home loan process (application, credit review, legal and technical evaluation, sanction, and disbursement), different sets of increasingly detailed documents will be required. Lenders might differ on specifics, but some of these are required across the board, like your application form, your ID proofs like Aadhar, Voter ID, Driving license, Passport etc, your age proof like Board of secondary education certificate, passport or Aadhar, proof of residence, income documents like Form 16, payslips, IT returns, business license, balance sheets etc, and property documents like NOCs, tax receipts, building plans, sale deeds, cost estimates etc.
The sheer quantity of documents can make this process intimidating, especially because small errors or discrepancies can be picked up by banks at any stage to cause substantial delays or even rejections. mymoneykarma maintains a comprehensive checklist of each of these documents at each stage so we follow up on your behalf to execute this part of your loan without any hassle. We conduct a thorough audit right at the beginning so you never have to worry about any surprises as you proceed through the stages of your home loan.
Answers to these questions tend to be needlessly complex, when there is only one metric you need to optimize: the present value of all your interest payments, that is, the time-discounted value of your total interest payment. To explain this, let’s take 3 simple cases. First, if you suddenly have excess liquidity or capital on your hands, and your alternate investment opportunities yield low returns, then you should consider a pre-payment of your loan to reduce your outstanding principal. If your home loan interest rate is high, you should additionally reduce the tenure of your loan.
These 2 actions will reduce the total interest payments you will make and save you a lot of money. Second, if your cash flows have increased, perhaps through a salary raise, and your home loan interest rate is higher than market returns, then you would save money by channeling your cash flows into paying off your loan faster through higher EMIs over a reduced tenure. If market returns are higher than your home loan interest rate, then you would make more money by instead investing your increased cash flow through SIPs. Third, if the home loan interest rates in the market fall, then you would save a lot of money by refinancing your loan and doing a balance transfer of your outstanding principal amount.