A home loan gives you the required funds to buy your dream home. There are multiple choices that one may have for this; however, there are certain critical points that need to be factored in before taking a home loan. This blog gives you a better understanding of these things.
Loan Amount: This is one of the most crucial lookouts. While you can procure a large amount if you have a good credit score, you shouldn’t overstretch. Note that home loans are long-term commitments. You should opt for an amount that you can quickly repay on time without fail, not just now but also in the future.
Take into consideration all your current and future liabilities before deciding on the amount. Note that buying a home is just one of the life goals. As you move ahead, there will be added responsibilities coming your way. In such a scenario, it can be challenging to serve high equated monthly instalments (EMIs).
The EMI that you pay towards your loan is directly proportional to the loan amount. It means the higher the amount, the greater the EMI. So, opt for a loan that’s easy on your pocket. Also, note that the maximum loan amount you can avail of depends on your income and property value. Lenders also take into consideration your present liabilities and cash flow before approving the amount.
Interest Rate: This is another essential consideration because the rate of interest has a direct bearing on the EMIs. You can avail of a home loan either on fixed or floating interest. In the former, the rate of interest remains constant throughout the loan tenure. In the case of the latter, the same varies according to market conditions.
Irrespective of the interest rate chosen, make sure it’s a competitive one. In other words, you must go for a lender who offers you a competitive interest rate. Compare rates from multiple lenders and avail the one which best fits your scheme of things. Note that women are at times given a concession on interest rates, and therefore, it makes sense to opt for a joint home loan where your spouse is the co-borrower.
Loan Tenure: Often, people fail to take into account this aspect. However, you must keep a watch on it. Though home loans are long-term commitments, choosing the right tenure is essential as it directly impacts the interest outgo. If the tenure is short, your EMIs will be high, but interest will be lower.
On the other hand, if the tenure is long, then interest will be high and subsequently the total payment. Loan tenure can also be used to enhance the eligible loan amount; a higher tenure can provide a higher loan amount but also increases the interest cost, hence it is a trade-off that one needs to balance.
So, make sure to choose a tenure where you can pay off the loan and keep a tight lid on interest outgo.
Processing and Other Charges: Lenders levy processing charges for processing your loan. These are to cover expenses incurred on assessing the property value. Charges vary across lenders, and it's essential to opt for a lender with the most competitive charge as high charges can significantly push up the cost of borrowing.
Equally important is to look at any other charges that are levied. Be very clear on these charges before sealing the deal.
Home Loan Eligibility Criteria and the Required Documents: Get yourself acquainted with the eligibility criteria and the required documents to process your loan application. Most lenders have a specific set of criteria that you need to meet before you become eligible for a home loan. If these are not met, your application is rejected.
Thankfully, most lenders specify the eligibility criteria along with the documents needed on their websites. Go through it carefully before applying so that there are high chances of your application getting accepted in the first go.
To Conclude: Finally, before signing on the dotted lines, do read the fine print carefully. Your home loan agreement is a legal document, and therefore, you must know all the terms and conditions. If you find any clause difficult to understand, get it clarified from your lender or rope in the services of a professional before signing. Happy buying!
Poonawalla Housing Finance offers home loans at a competitive interest rate with minimal documentation and easy terms and conditions. Visit our website www.poonawallahousing.com or contact us at 1800-266-3204 to know more about our home loan offer.