There are many things to keep in mind before taking a home loan.
Things to consider before taking a home loan in India: There are several factors that are important for a borrower to know before applying for a home loan.
Owning a home is considered one of the life events for many people. Optimizing the resources to do so is another challenge for those who do not have an amount that would help them buy a home in one go. Taking a loan is the most obvious option for those who cannot afford to put together a substantial portion of the cost of the property.
Home loans offered by financial institutions facilitate the transaction and help people buy homes without compromising on their basic financial needs.
There are several factors that are important for a loan seeker to know before applying for a loan from a financial institution like a bank.
Eligibility Mainly, the home loan eligibility is determined on the basis of the income and repayment capacity of the customers.
CIBIL Score- Banks and other lenders check your CIBIL score before approving your loan.
Rate of interest– Compare rates from different banks before making a decision. One can easily browse online and check the prevailing interest rate.
type of interest– Fixed, floating or mixed rate home loans
In a fixed rate loan, the interest rate is fixed at the time of taking the home loan. On the other hand, floating rate or adjustable rate home loans are linked to the lender’s benchmark rate, which is, in turn, in sync with the market interest rate and that of the RBI.
Compound interest rate is another option where the tenure is fixed for a fixed rate and then floating rate is applied.
Read also: Education Loan: Things To Keep In Mind; View details about Vidya Lakshmi Portal
Types of Home Loans- Learn about the different types of home loans that you can avail. Banks offer many loan products. Choose the one best suited to your requirement.
processing fees: Check whether there is any processing fee involved. Banks charge a certain percentage of the loan amount as processing fee or a minimum amount is fixed. There may be other loan-related fees, including documentation and legal. It is advised to thoroughly check the details with the lender.
insurance cover Check whether the loan requires a loan cover term assurance plan or not.
loan amount– Check whether the loan amount is available as per your requirement. Most lenders offer home loans up to 75 to 90 percent of the property cost. However, the exact ratio will depend on the loan value.
credit period– What is the tenure of the loan and till when you will be paying the EMIs. The longer the tenure, the more interest you will have to pay.
Preclosure / Foreclosure – Check whether your loan has foreclosure option and what are the charges involved. Under home loan pre-closure, a borrower has the option to pay off the loan before the actual pre-determined period. One can take a foreclosure home loan to save on interest.
document– Check what kind of documents are being asked by the lender for the purpose of KYC and loan process. This may include income, employment proof and basic asset documents which need to be submitted for loan disbursement.
If you are a home loan customer then there are some benefits too. The government has made provisions for tax benefits on both principal payment and interest payment on home loans.
read all latest business news Here