5 Things You Need To Know About Home Loans!

It’s a fact that everyone docks the dream of owning a home at some point. However, it’s no denying that the process of buying a home can get intimidating, especially from a financial point of view. But with some careful financial planning and Home loans, it can definitely be conquered.  

Nevertheless, the process of securing a mortgage to purchase a home can be daunting.  You need to check the eligibility criteria required to actually do so.

So, without further ado, here’s all you need to know about the factors, which needs to be considered before applying for Home Loans:

Home Loan Charges:

Be aware of the extra charges that come with opting for a home loan. The lender’s processing fees, service fees and administrative expenses – there are lots of miscellaneous expenses involved.  Also, when the EMI rolls in, exchanging post-dated cheques, modifying monthly installments or other such changes would be charged. So avoid making modifications and make sure you keep the lender’s schedule of charges in check.  

Loan Eligibility:

Before the loan amount is sanctioned, a thorough verification of your income, credit card bills and other such dues are made. Home loan lenders generally provide 80% of the value of the property as the loan amount, subject to your income. While assessing the income criteria, the lender would consider only the income that can be used to repay your loan.

Be Careful with Loan Agreement:

Make sure you read your loan agreement carefully, despite how difficult the bulky Concord seem. No matter what promises your lender makes verbally, it’s all worthless unless mentioned on the agreement.

Never sign a blank loan document, even if the marketing personnel tell you to do so. Check the details filled in your loan document to ensure that the terms are the same as what you agreed.

Paying Interest Rate:

In terms of the interest rate models in the market, there are mainly two:

• Fixed interest rate: The rate of interest and EMI remains the same for the complete tenure of the loan or till the time loan account is closed whichever is earlier. It’s beneficial when the interest rates are expected to rise in the near future
• Floating interest rate: The interest rate and tenure of EMI are dependent on the base rate of the lender. As the base rate changes the home loan interest rate and tenure also changes. It’s beneficial when interest rates are expected to fall in near future

Tenure of Home loan:

The tenure for home loans ranges from 5 years to 30 years typically. While deciding on the loan tenure, do keep a few factors in mind. You would have to serve the EMI every month after the deductions like PF, ESI, Gratuity and Taxes, from your salary.

Remember, a loan with a shorter tenure would require lesser interest, but with higher EMI.

On the whole, be aware of all the tax implications and tax benefits you are entitled to receive while servicing your home loan. Buy your dream home quickly but safely!