Having ones one sweet home is a cherished dream for many people. India through all these years has seen population migrate from one place to another. Recently there has been heavy migration to places like Noida, Gurgaon, Mumbai or Bangalore for service related matters. Besides the joint family set up is slowly and steadily decreasing. Therefore, the need for homes is very much there.
Now in the early days it used to take a lifetime for someone to build his own home. However today the scenario is completely different. It is because banks and financial institutions today have come forward and is ready to provide people home loans to buy their own home right at the start of the careers. The advantage it has over staying on rent is that at the end of your career you will at least end up owning an asset. You may pay thousand of rupees as rent but still you do not end up owning the place.
Now when you do apply for a loan the interest rate is an important factor, which is always there in your mind. Today due to the presence of large number of banks and financial institutions, wanting to lend the competition is huge. Besides interest, payments are a major source of revenue for the banks. In such a scenario, there are loan disbursement targets on loan officers who are engaged with the banks. Thus, the ultimate gainer is the customer as the rate of interest is never high. There are many banks, which are ready to offer home loans. Therefore, if you think the rates and the conditions of some bank is not to your liking you can always go to the next bank.
However the policies of the Reserve Bank of India, or popularly referred to as RBI plays an important part here. The RBI is the watchdog of the economic condition of the country. It has to keep a check on inflation and as well, as see that growth does not get affected. Therefore, it controls the money supply in the hands of the common person. If it feels that inflation needs to be controlled it increases the cash reserve ratio or CRR.
It sometimes also tinkers a bit with the Repo rate. Banks here do feel the heat, as they now have to hand over more cash to the RBI. They in turn increase the home loan rates, which mean you now, will have to pay more money as EMI. Now if the CRR or the Repo rate decreases the banks can breathe easy. They even decrease the home loan rates of the borrower.
The rate of interest, which was discussed in the above paragraph, is the adjustable rate mortgage. However if you are not at all comfortable with the market volatility you can opt for the fixed rate home loan. Here the rate of interest remains same right through out the tenure of the loan. The RBI may tinker with the cash reserve ratio as many times, they feel like but your rate of interest will not change. However, availing one is difficult, as banks mainly prefer sanctioning adjustable mortgage rate loans as it suits them better.
The customer also has the options of Balloon mortgage rates. Here the rates of interest are low. However, the disadvantage here is that at the end of the payment schedule there is still be a lump sum amount, which the borrower will have to pay in just one payment. It suits people who have borrowed for the short term.
Banks thus have helped the common person to buy a home early in his life. He can thus at least have an asset for the rest of his life. Paying EMI is better than paying monthly rent. Therefore, if you are living on rent and if you feel that you can pay monthly installments, please do not hesitate to apply for a home loan.