I bought a house last year and took a home loan after evaluating 5 different banks. The entire process of selection took me around 2 weeks and I am finally happy with my choice. Here is the process I followed and what I learnt from it, hope it will be useful to others!
1. Talk to a range of banks, not just 1-2
In my case, I talked to a. banks who had approved the project b. the salary account banks in my company. c. banks recommended by close friends. Nowadays, all the banks are willing to send execs. to visit your office or home, at a time convenient to you. This step is important to understand the different products in the market. For instance I discovered that out of the banks I evaluated, only ICICI and HDFC had a’step up’ loan, where EMI increases over time. This meant greater relief in the short term as I could pay a smaller EMI in the first year.
You will find that interest rates don’t vary so much - it is the products and the flexibility of banks to accomodate you will vary far more. I started noting down features and products that were suited to my needs and I made an Excel sheet comparing the different banks on these parameters.
Being knowledgeable about different products will help you to ask the different bank reps the right questions.
*2. Ask for a copy of the loan agreement - go through the fine print or ask a finance/ legal person to help you
*Normally, the bank reps do not give you the agreement copy until you have taken the loan. Insist and take a copy prior to signing anything. This can be an eye opener. For example, the Citibank rep. was insisting that they offered a’fully fixed’ loan. But the agreement clause mentioned that interest could be reset depending on’exceptional conditions’ - natural disaster, market conditions. Especially read the fine print for products such as Home Saver(combined with savings account to reduce interest etc). You could save yourself a lot of heartache later.
3. Prefer any of the banks who have pre-approved the project
Banks take time to approve and clear new projects. The advantage of a pre-approved lender is that a lot of this paperwork is completed. I actually recommend the pre-approved lender route, as the builder will also help you if necessary. In my case, ICICI Bank had pre-approved the project but at the last minute they downsized my loan by around 2 lakhs. I spoke to my builder and asked him to help. Within a day, the bank authorised the full loan. If you are buying a re-sale property, check out the bank from whom the earlier owner had taken the loan.
Another useful step if you are in a hurry - call up a loan agent. I have a friend who did this. The loan agent will not(and should not!) charge you. he/ she will merely ensure that you get the loan sanctioned from a reputed bank, ASAP
4. Decide what are the factors you will not compromise on - irrespective of which bank you choose
In my case, after considering all banks, I was very clear that I wanted a. The maximum possible financing b. A low initial EMI as I could not afford high EMIs immediately after purchase c. A tenure of 15 years and not 20 years. And I then checked out which bank could offer me the best possible deal that met my terms.
Then, see what are the things that you may have to compromise on. For instance, I was initially keen on a fixed-rate loan. But I had to compromise on this, because I wanted max. financing AND low EMI, and a fixed-rate was reducing my eligibility.
*5. Try to get upfront/ initial charges waived or discounted
*Apart from processing fee, a lot of banks are willing to waive off these charges if it is demanded by the customer. Be sure to ask!
6. Go for ECS payment rather than PDC
Given the way interest rates are fluctuating today, ECS is far more convenient in the long run. It may be tiresome to set up initially, but trust me, in the long run, it’s far better than changing your cheques!
I hope this helps. Good luck and enjoy your new home!