Owning a house is considered to be one of the life events for many people. Optimising resources to make it happen is another challenge for those who do not hold an amount which will help them to buy a house in one-go. Taking a loan is the most obvious choice for those who can’t put a big chunk together matching the price of the property.
Home loans offered by financial institutions facilitate the transaction and help people to purchase a house without compromising on their basic financial needs.
There are several factors which are crucial for a loan-seeker to know before the person applies for the loan from a financial institution, like a bank.
Eligibility- Primarily, home loan eligibility is determined on the basis of income and repayment capacity of customers.
CIBIL Score- Banks and other lenders check your CIBIL Score before approving your loan.
Interest rate– Compare rates of different banks before concluding the decision. One can easily browse online and check the prevailing rate of interest.
Type of interest– Fixed, floating or a mixed rate home loan
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, in turn, moves in sync with the market interest rate and RBI.
Mixed interest rate is another option where a duration is decided for a fixed rate and then floating rate is applied.
Types of home loans- Know different types of home loans you can avail. Banks offer multiple loan products. Choose the one best suited to your requirement.
Processing fees: Check if there is any processing fee involved. Banks charge a specific percentage of the loan amount as processing fees or a minimum amount is fixed. There can be other loan-related fees including documentation and legal. It is advisable to check the details thoroughly with the lender.
Insurance cover- Check if the loan cover term assurance plan needed for the loan.
Loan amount– Check whether the loan amount is available or not as per your need. Most lenders provide a housing loan ranging from 75 to 90 percent of the property cost. However, the exact ratio will depend on the loan value.
Loan tenure– What is the duration of the loan and till when you will pay the EMIs. The longer the tenure, the more interest you pay.
Preclosure/foreclosure – Check whether your loan has the option of foreclosure and what are the charges involved. Under home loan preclosure, a borrower has the option to pay the loan before the actual pre-decided tenure. The person can go for a foreclosure housing loan to save up on interest.
Documents– Check what types of documents are being asked by the lender for the purpose of KYC and processing of the loan. It may include income, employment proof and original property documents, which need to be submitted for loan disbursal.
There are some benefits as well if you are a home loan customer. The government has created provisions for tax benefits on both, principal repayment and interest payment on housing loans.
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