Things You Must Know Before You Take a Home Loan

These have been specifically designed to not let you miss on the opportunity to make such dreams come true without having to pay all the money up front. Nonetheless, taking a home loan could seem a sophisticated process. There are a lot of factors related with a house loan that you want to know before taking a loan. Probably the most prominent ones are listed beneath:-

1. The factors which could have an effect on the eligibility criteria: The most effective way to calculate your own home loan eligibility is by calculating the EMI. Usually, banks limit the amount to 40 and 50% of the borrower’s revenue – together with the essential wage and the dearness allowance. It additionally considers the credit history of a borrower. So if in case you have any existing loan or a poor credit score, the loan quantity will be decreased further or you may have to pay an increased rate of interest on the house loan. Individuals with a stable income, strong repayment capability and good credit rating discover it comparatively easier to get a loan as compared to these with erratic earnings and poor credit history. Also having a co-applicant allows you to get a house loan easily.

2. Understand your loan type: Banks supply house loans in two interest types – the fixed interest loan and the floating interest loan. The fixed interest loan is a type of home loan the place the curiosity rates remain similar and borrower has to pay a fixed EMI throughout the loan tenure. On the contrary, in case of a floating curiosity rate, it varies as per the market conditions that lead to fluctuation in EMI quantity more often. This is why house loans with fixed curiosity type have 1 to 2.5% higher curiosity rate than floating interest loans.

3. The interest rate: Whatever house loan type you choose, do not forget to barter on the rate. Although the banks would always have an edge, you’ll need to haggle on this, especially in case you have been a loyal buyer of the bank and have financial savings account in the identical bank. The negotiation would be so much simpler if you have a transparent credit history. Besides, you may additionally be benefitted when you apply for the loan at the end of the month. For the reason that banks have enterprise targets, they can be more versatile at this time if they want the business.

4. The fine print: A house loan agreement is a authorized document that has all the small print of the loan. For those who think that not paying the EMI on time will only lead to troubles, you are mistaken! There are many clauses hidden in the fine print. Thus it is advised to read the final papers of the loan agreement careabsolutely before signing the dotted line. Be careful concerning the loan processing charge, penalty fees, hidden clauses, service expenses and the prepayment penalty, etc. Any negligence in this context would lead to bigger problems in future.

5. Longer loan time period means costlier loans: As a basic rule of thumb, the longer the tenure of the loan, more will be the interest you’re likely to pay over a period of time. Many can afford this rise however not everyone can do so. Therefore it is sensible to use for a loan quantity that you would be able to simply payback in the shorter tenure. This way you might have to pay huge EMIs but for a shorter length and without propping up more interest rate.

These are quite a few things that it’s essential to keep in mind while applying for a house loan. Note that if you get a loan from one bank does not imply you might be stuck there until the time your loan is fully paid. You always have the option to switch. You just need to pay the processing charge in this switching process and likewise the pre-payment penalty (if charged by your present bank).

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