We as Indians,never feel satisfied with any purchase unless there is a bit of bargaining. Be it with the local vegetable vendor or the electronic goods salesperson,the sale is complete only after we are done with our share of bargaining.
What about the probably the biggest purchase of our life; the housing loan? Do we bargain enough to squeeze out the best deal? For some first time buyers,the anxiety and eagerness to claim their first house soon may lead to a mild attempt or none at bargaining. For those who do bargain,the rigid stance shown by the lenders leads to accepting defeat soon.
We refer to the housing loan as the purchase and not the house,for the house is considered purchased only after the last EMI is paid,whereas the loan is considered purchased the moment we sign the dotted line.
Come to think of it,for example the difference between a 10 per cent and a 10.25 per cent loan for R20 lakh over 20 years will result in a differential outflow of over R85,000. So why not haggle over it?!
The easiest bargain
Probably,the easiest bargain in a home loan is the processing fee. The fees vary from lender to lender,but the decision to reduce it can be taken even by the local sales manager and hence it is easy to get a good rate and sometimes even a waiver. The best part of this bargain is that you can feel the satisfaction of having saved immediately. 1 per cent on a R18 lakh loan is R18,000 saved.
The biggest expense,irrespective of the amount borrowed is the rate of interest charged. To get a good deal on this you could follow one of the following strategies:
1. You can use online loan comparator tools to find out the various rates being offered by lenders,which will help you to compare many lenders and give you an indicative interest rate pricing for them.
2. Given the current interest rate scenario and tough competition,most lenders quote their best rates only. Hence getting a discount on the actual interest rate is not going to be very easy as the maximum leeway that the lender has will be in the range of 0.25-0.5 per cent. But then,as discussed earlier this could mean a saving of over R85,000 in the long run.
3. A good way to get this discount is to try to apply for the loan during the month end or quarter end,when most of the sales people will be under pressure to deliver results and might show a little leniency to get your account.
4. Employees of big corporates are given some extra discounts on loans provided their company has a tie-up with the lender. Enquire with your employer for any such scheme and utilise it to the maximum.
To ensure you are in a good position to bargain,invest a little bit of effort in shoring up your finances. This can help in getting a better rate as well as a better tenure.
Some of the things that can be done to achieve this are: roping in a co-borrower or a guarantor,adding your father or spouse with a good income as a co-borrower etc.
Credit score matters
Keep a strict tab on your credit score. Wise use of credit cards or a good repayment track record of a past loan can increase your negotiating power with the bank as you have already established your credibility in terms of handling credit.
After several hikes last year,interest rates are at last cooling off and a downward trend is expected in the next few months.
Before this actually happens builders might provide discounts and banks could also be a bit lenient,understanding that most will favour waiting and watching. This may work in your favour,especially when you land a good home deal and use your bargaining prowess well.
A word of caution: Always clarify that there are no riders attached and do a check on their service levels,track record and other charges levied. It is always advisable to go with a lender who has a track record rather than a new player just for getting better rates,as this is going to be a long-term association.
The author is CEO,BankBazaar.com