How to choose bank for home loan?
When you are short on funds, or are not in favour of liquidating your savings, a home loan is a great form of financial assistance. Banks help make your dream of buying a home a reality with simple monthly instalments and the ability to select the repayment tenure according to your convenience. But, before you start applying for a home loan, go through these important proposals that could help ease the home loan.
There are various ways to finance the purchase of a home. That include loans and mortgage loans from Housing Finance Companies (HFCs) and Non-Banking Finance Companies (NBFCs).
Scheduled Commercial Banks (SCBS)
The highest share of the housing credit portfolio in the housing finance sector is accounted for by Scheduled Commercial Banks (SCBs). The broad customer base that these banks enjoy can be attributed to this. The SCBs are regulated by the Indian Reserve Bank (RBI) and consist of two types: public sector banks and private sector banks. Public Sector Banks are those in which the government holds the highest stake, while private individuals hold the majority of the stake in a private sector bank.
Scheduled Commercial Banks
Public Sector Banks :- State Bank Of India, Punjab National Bank, Syndicate Bank
Private Sector Banks :- ICICI Bank, AXIS Bank, HDFC Bank
See Also: Top 10 tips to sell property faster
Housing Finance Companies (HFCs)
Housing Finance Companies (HFCs) are the second largest participants in the housing finance sector, overseen by the National Housing Bank (NHB). HFCs usually provide loans at a higher rate than SCBs. However, they can apply stamp duties and registration fees to the amount of the loan, which is not possible for commercial banks. Thus, those who do not afford a high down payment and therefore require a higher loan sum are typically the consumer base of HFCs. HFCs are often approached by those who don't get a loan from banks.
For someone who needs to borrow a larger amount of loan and wants to pay less from his or her own pocket, HFCs are ideally suited. SCBs are allowed to lend up to only 80 percent of the property value, as per RBI guidelines. This means the borrower has to pay on his own at least 20 percent of the value of the land. The borrower ends up paying a hefty sum from his pocket when the stamp duty and registration charges are applied to the total.
However, when calculating the overall cost of the land, HFCs, controlled by the National Housing Bank (NHB), take into account stamp duty and registration costs. This can make a lot of difference in a nation where these charges can be as big as 6-8 percent. When it comes to determining business revenue, eligibility, and credit ratings, HFCs are also versatile.
In the other hand, obtaining other loans and goods becomes simpler if you take a home loan from a bank and establish a relationship.