Buying your dream home is now possible due to easy availability of finance. Numerous banks and Non-Banking Financial Companies (NBFCs) offer loans at competitive interest rates. The borrowed amount has to then be repaid over a period of time, known as loan tenure. Borrowing home finance is a sound financial decision as you do not have to deplete your savings to make the purchase.
There are numerous aspects that have to be taken into consideration while applying for a loan. One of the most important factors of the home loan application process is the valuation of the property. This step is important as it helps you decide the amount you need to borrow. Higher the cost of the property, higher will be the loan amount required, and vice versa. It is important to understand that banks and NBFCs do not provide a loan of the entire value of the property. Applicants are allowed to borrow only a certain percentage of the total value of the home.
In order to determine the value of the home, numerous factors have to be considered. The record details as well as condition of the home have to be taken into account. Some aspects that determine the value of the home include the number of rooms, the area of the house, fixtures, as well as the location of the home. If the property has a school, market, or a place of worship nearby, the cost is generally high. The property’s unique attributes are also taken into account while evaluating the value, such as building structure and condition, local governing bodies, parking availability, gardens and other amenities, as well as the value of other homes in the same vicinity. All these factors along with the prevailing market condition help to determine the property’s valuation.
An online calculator is a useful way to obtain a quick estimate of the real price of the property without any difficulties. Such a digitized tool takes the aforementioned factors into consideration while determining the value of the home.
The main reason for checking the value of a property is to gauge the amount required loan amount. Lenders also use the property as security against the loan amount provided. Generally, the loan amount is high and therefore financial institutions need an estimate of the value of the home, so as to cover their losses in case the borrower defaults on the loan payments. The property, therefore, acts as collateral to recoup the lender’s losses in case the borrower fails to repay the loan on time.
It is important to understand the difference between the price and the value of a home. The price is what you pay to purchase the house. It is not necessary that the price paid is equal to the value of the home. It is, therefore, necessary to accurately assess the property value before you apply for a home loan. You may find the property valuation online or hire a qualified property valuer to check the property’s valuation. Upon thorough inspection, the valuer provides a valuation report. You may then apply for a housing loan based on the valuation report.