The Reserve Bank of India has decided to rationalise the risk weights of home loans and link them to loan-to-value (LTV) ratios for new housing loans till March 31, 2023.
In October 2020, the risk weights for individual home loans were rationalised by associating them solely with LTV ratios for new home loans sanctioned up to March 31, 2022. Nevertheless, considering the importance of the real estate sector, the RBI has planned to make these guidelines applicable till March 31, 2023.
Is This Good News for Homebuyers?
Usually, lenders use the loan-to-value ratio to ascertain the risk associated with a loan and whether they should deny or approve it. This ratio is used to compare the loan amount that you can borrow to the value of the asset that you will buy. In the case of home loans, the asset is the property you wish to finance with the loan.
Now that the RBI has decided to relax LTV home loan rules, these loans are expected to become cheaper. Earlier, the Reserve Bank of India announced to keep the repo rates fixed during the Monetary Policy Committee (MPC) meeting for FY 2022-23. The repo rate was fixed at 4%, according to the announcement. Home loan borrowers who pay EMIs at a flexible rate of interest will keep paying the same interest rate that’s applicable currently.
How Can Home Loan Borrowers Make the Most of This Golden Opportunity?
Borrowers can make the best use of the relaxation of LTV ratios for home loans by availing one from a renowned bank offering various benefits.
Say, as a borrower, you don’t have too many documents for a home loan. So, you should choose a top lending bank offering loans with basic documentation requirements. Who knows? You may even get a home loan without income proofs like ITR.
Besides, you can look for the following other benefits on home loans:
- Loans are available for all aspiring homebuyers including salaried people like corporate professionals and government employees, and self-employed people like doctors, traders, CAs, small business owners and lawyers.
- Eligibility criteria are easy and there’s an option to improve your eligibility by adding a co-applicant like your immediate family member or spouse. The eligibility criteria primarily include age specifications only. For example, a self-employed borrower needs to be 28-70 years old when applying for the loan. A salaried borrower needs to be 23-60 years old (for Indian residents) and 25-60 years old (for NRIs). The person must work in an MNC, public/private sector company, LLP, partnership or proprietorship.
- The bank offers fast loan disbursals in as less as 72 hours.
- Big home loans are available from ₹3 lakhs to ₹5 crores.
- A home loan calculator is present on the bank’s website to help you choose a suitable loan amount and tenure based on an eligible interest rate to calculate the EMI value.
Another perk to look for is whether the bank offers home loans to purchase a property of any kind. It can be:
- A ready-for-possession, under-construction property or builder property
- New or resale property
- Property from Apartment Owners’ Association, existing Co-operative Housing Society, state housing boards like MHADA and DDA, homes by private developers or Development Authorities settlements
- Property in regularised colonies, citiesand gram panchayats
- Self-constructed/multi-unit property, a house constructed on a plot of land owned by you or a residential property to be refinanced
- Property to be constructed on a plot allotted by a Development Authority or on a leasehold/freehold plot
Go through the documents for home loan and get them ready before applying for it. Choose a reputed bank that maintains transparency in mentioning the required documents on its website.