The maximum home loan tenor can go up to 30 years. Some lenders now allow home loan borrowers to repay their loans over 40 years as well. Such a long home loan repayment tenor eases the stress of loan repayment but it also increases the total interest payout on one’s home loan. When the interest in housing finance exceeds a certain level, the return on investment suffers. Therefore, home loan applicants are advised to choose their loan amount and loan tenor carefully. Further, investing in affordable housing can help one realize their dream of home ownership.
What is Affordable Housing?
The term affordable housing includes housing units created to cater to the demands and needs of middle-class and lower-income group individuals. These units are equipped with only the basic facilities and are designed to be essentially affordable.
The Government of India has since the very beginning promoted homeownership. Unlike in the West, where most people live on rentals, in India, homeownership is high on many people’s priority list or the things they want to do before they turn a certain age, primarily because Indians associate homes with financial security and mental peace. In this article, we look at different government-funded programs and schemes that can make buying an affordable home easy for you. These schemes and programs draw low housing loan interest rates. More importantly, some of these schemes require loan borrowers to pay only a small down payment, which further makes things easier. However, know that all of these affordable housing schemes have very strict qualifying criteria and only those who qualify each of the qualifying criteria can apply for affordable housing finance.
Affordable Home Loans: Government Housing Loan Schemes
Here are some of the government affordable home loan schemes that can make the process of buying an affordable home easy for you.
Pradhan Mantri Awaas Yojana (PMAY- Gramin and Urban)
PMAY Gramin is focused on ensuring that people in rural India have access to housing. Other than providing funds to help become homeowners, this scheme also focuses on providing relief through funds for pucca houses. Under this scheme, priority is given to individuals belonging to the SC/ST communities and people who work as manual scavengers.
PMAY Urban, on the other hand, tries to cater to the needs and aspirations of people belonging to economically weaker sections and middle-income and lower-income groups.
Rural Housing Interest Subsidy Schemes (RHISS)
The Rural Housing Interest Subsidy Scheme focuses on helping people from rural areas who are not eligible to apply under the PMAY rural scheme. Under this scheme, the government provides affordable or low-interest-rate home loans to individuals for the construction and repair of homes. However, these homes must be constructed in line with the safety standards mentioned under the RHISS.
Credit-Linked Subsidy Schemes (CLSS)
CLSS is a part of the PMAY scheme. Under CLSS, the government has described different categories and loans are sanctioned based on the category to which an individual belongs.
HUDCO’s Individual Housing Loan Scheme
HUDCO refers to the Housing and Urban Development Corporation. HUDCO is a government entity that provides home loans to individuals belonging to economically weaker sections and low-income groups.
These are some of the government-run affordable housing schemes focused on making housing accessible and affordable to individuals belonging to rural areas and lower and middle-income groups.
How to Secure Affordable Home Loans from Banks and NBFCs
If you are not eligible to apply for any of the government-run schemes mentioned above, individuals planning to apply for housing finance can even consider availing of a loan from a bank or an NBFC. In this case, the loan borrower should focus on securing the lowest interest rate they can get. We now share with you some easy tips on what you can do to secure a low home loan interest rate loan.
- One of the best things that you can do to increase your chances of being able to avail of an affordable home loan is to apply with a very high CIBIL score. CIBIL scores range from 300 to 900. However, having a CIBIL score in the range of 750 to 900 makes it much easier to avail yourself of an affordable home loan as such a CIBIL score depicts a borrower’s ability to handle debt easily and repay it without defaulting.
- People who change jobs often are seen as unreliable borrowers by banks and NBFCs. These are people who cannot be trusted with timely repayment of loan EMIs. Consequently, maintaining a stable job and income can work in your favour.
- You can also benefit greatly from a low FOIR or fixed-income-to-obligation ratio. A high FOIR essentially denotes that you are already repaying a significant portion of your income to repay debt. Therefore, affording home loan EMIs, which almost always turn out to be a hefty amount, won’t be easy for you. Therefore, when FOIR is high, to offset the risk, lenders generally charge a high rate of interest.
Final Words
If you are planning to avail of housing finance to fulfil your dream of becoming a homeowner, you must prepare all the documents required for home loans and keep them ready for you. You must also use the home loan calculator to plan your repayment strategy, borrow the right amount and select the right loan tenor for you.
