Important Things You Must Take Note of Before Choosing a Home Loan Deal

Home Loan

There are various uses for real estate property. You can either purchase a home, use the home as an investment in real estate or rent the same to several tenants or tenant and earn considerable rental income. You will require to apply for a home loan for the same. Also, note that home loan processes and terms and conditions may differ from one location to another. In simpler words, Home Loans in Delhi would be different from Home Loan in Mumbai. So, before you apply for a home loan, ensure to understand the terms and conditions of a home loan specific to your location. 

There are distinct banks providing home loans, which makes it one of the most important and crucial kinds of loans available in the market. You require planning in a proper way before placing an application for a loan to get a good deal. There are various things you must be well-versed in before you place an application for and take up a home loan – 

Eligibility criteria – 

Before taking up a loan, being aware of the eligibility parameter is crucial, and a home loan is certainly no exception. Firstly, you require seeing whether you qualify for the home loan. Every financial institution has distinct criteria for potential borrowers of home loans. The eligibility parameter involves age, financial standing, qualification, dependents, ability to repay, credit score, etc. To get a good idea, you can make use of an online home loan eligibility calculator. 

Distinct kinds of home loans – 

There are various kinds of home loans that you can take up. The three important kinds of home loans available in the market are floating or adjustable interest rate loans, fixed-rate home loan rates and combination or mixed loan rates. You can take up any one of them depending on your preference. 

Approval for a loan before selecting the home – 

Before you choose a deal for a home loan, you must get approval for a home loan from your lenders. This helps you to easily narrow down your options and make your home searching highly focused and systematic. Pre-approval will even make it simpler to get a good purchase deal on a home. Also, the lenders can recommend good properties as per your preferred regions or locations. 

Loan proceeds – 

The bank will endow you with the loan proceeds depending on the number of your preferred properties or property. It ranges anywhere between 75 per cent and 90 per cent of the preferred property’s cost. At times, your search for a home will even depend on the sanctioned amount by financial institutions. If you are applying with a co-applicant, then the financial institution will factor in his/her income and enhance your loan proceeds. 

The additional expense linked with the home loan – 

There are additional expenses, which come with the home loan. This involves interest constituent, administrative fees, processing charges, prepayment fees, etc. Your home loan must ideally have no prepayment fees if you are opting for a floating or adjustable loan deal. 

EMI (equated monthly instalment) – 

The full form of EMI is equated monthly instalments. This is the amount which you as a borrower must pay to the bank every month. The EMI involved the principal constituent and interest constituent. So, you must select the EMI option very carefully. 

Repayment period – 

Lenders tend to provide home loans with distinct repayment tenures. The longer the repayment tenure, the easier and less burdened it is on your pocket because you will require paying a lower EMI over the longer time period. 

Documents required – 

There are distinct documents required when you place an application for a home loan. Such documents involve KYC documents, credit/income documents, and your property documents. Your original document linked with the property is mortgaged with the lender as security on the property that is financed. 

Insurance cover – 

You are required to buy insurance when taking up a home loan, as this would prevent you from becoming liable for an outstanding loan. The insurance company tend to pay an outstanding loan if anything unfortunate or unexpected takes place. 

Defaulting on your loan – 

It is necessary to pay the loan timely. In the case, you default on the loan EMI for three months, lenders are usually empowered to take several steps against you directly as per the SARFAESI act. 

Research on the loan option – 

On the internet, you must make a good effort to conduct extensive research on distinct home loan options available nowadays in the market. Your research must even involve three important parameters that formulate a home loan, namely, EMIs, down payment and loan repayment tenure. Researching all three parameters before submitting a home loan request allows you to select a suitable home loan deal from better home loan lenders at an attractive rate of interest. Home loan proceeds are even generally bigger than other loan deals, so ensure you explore all details and then uncover every bit that may come along your way before, during and post home loan application. 

Zero in on affordability – 

While there are various home loan options for you to select from, affordability is a major contributing parameter that you require to consider before you place an application. You must be able to not just afford the fixed EMI but must even be able to simply adjust them in a comfortable manner within your living cost. Factor in the overhead expenditure beyond the loan EMI you select to pay every month and ensure maintain a good and steady outflow of income to mitigate unforeseen exigencies. So, while you can go for buying a home that you thoroughly like in your preferable location, being able to easily afford the same is equally an important parameter. 

Spend cautiously – 

A factor that follows the clause of affordability is monthly expenditure. Once you opt for a home loan and you have this credit option to repay, it is advisable and preferable to adopt a stringent budget to mitigate your EMIs. You must be regular in making your EMI payment to maintain creditworthiness and to simply avoid overdue or enhanced rates of interest. As spiralling down of non-repayment of home loans is very popular and common, avoid this by channelling your resources towards timely and regular repayments of loans to gain complete home ownership. This means cautiously spending and postponing any non-instant buys. Such controlled income outflow would allow you to repay your debts easily.

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