What Is a Pre-Approved Home Loan? Pros & Cons - Home Loan Stories | Kotak Mahindra Bank

23 JUNE, 2021

Most homebuyers would shortlist suitable properties and then approach a lender for a home loan. But have you ever considered a pre-approved home loan? Until the lender approves your loan, there’s bound to be some uncertainty. A pre-approved home loan bypasses the unpredictability and directly offers you the loan facility. Keep reading to learn what a pre-approved loan is and the pros and cons of availing one.

 

What Is a Pre-Approved Home Loan?

 

A pre-approved home loan is a facility that lenders offer to potential borrowers even before selecting a   property. Most home loans come with the uncertainty of approval as it depends on various factors such as applicant’s credit score, repayment ability, property valuation, etc. But pre-approved home loans directly present the borrowers with the loan facility that can be disbursed within a short time frame. Such a home loan is sanctioned after reviewing the applicant’s financial eligibility and position. However, the disbursal only takes place at a later stage after the property is finalised. With us, you can get in principle approval of your home loan via a paperless process just by using your income tax credentials.

 

Pros of Pre-Approved Home Loans

Here are some key benefits of opting for a pre-approved home loan in India:

  • Promotes financial planning

Choosing pre-approved home loans helps you plan your finances well in advance. This is because you become aware of your borrowing capacity and thus, look for properties within this range. If you were to go for a standard home loan, you could end up wasting a lot of time looking for houses that don’t match your eligibility.

 

  • Offers more negotiating power

As you already have a pre-approved home loan, sellers and builders shall consider you to be a genuine buyer. Thus, it gives you an upper hand and enables you to negotiate for a more lucrative deal.

 

  • Quicker loan processing

As the lender has already evaluated your home loan eligibility, they only need to verify and inspect the property being purchased. When compared to a standard home loan, the processing for pre-approved loan is much faster.

 

Cons of Pre-Approved Home Loans

Checkout the drawbacks of getting a pre-approved home loan:

  • Non-refundable processing fees

In case you drop the plan of purchasing a home or the validity of the loan expires, then you lose the processing fee. Usually, this amount isn’t refundable and thus, you must keep this in mind while opting for a pre-approved loan.

 

  • Pre-decided interest rates

Your home loan will be disbursed based on the interest rate locked in during the loan approval. Even if the interest falls between the approval and disbursal, you cannot benefit from the reduced rates for your home loan. This can be a drawback for some borrowers as even a slight change in rates can affect the repayment sum.

 

  • Pressure of pre-approved loan

Opting for a home loan is a long-term commitment that you need to think through. As you need to get pre-approved loan disbursed within six months from the date of approval, it can create an unintended pressure to purchase a home. If the loan validity expires, then you have to pay the processing fees once again for renewal.

 

You need to keep in mind both the pros and cons of a pre-approved loan before you opt for one. It is prudent to apply for the loan only if you are certain about purchasing a home within the next six months. So, if you are certain, don’t wait. Apply for a pre-approved home loan from Kotak Mahindra Bank today!

 

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.