Home loan 5 things you should consider before Apply
Buying a house is definitely a huge decision for many of us with the rising prices of the property and the high rates of interest prevailing in the market.
Therefore, choosing the right home loan product in the market is quite crucial in order to avoid any surprises later. Getting home loans can be time consuming and exhausting.
It involves a lot of paperwork and documentation. Before you get a home loan, here are few factors that you should consider, especially if you seeking housing loan for the first time.
EMI is the first thing that influences housing loan from a borrower’s point of view. It is the monthly outflow which will go towards repaying your loan for the next 10-15 years. Do not push your limits, thinking that you will earn more in the future. Do not let your EMI exceed 40-45% of your monthly income. If you start earning more, you can always pre-pay your home loans with additional disposable funds.
After you have decided on how much EMI you will pay, you need to check how much you can give from your pocket. No bank will grant you 100% home loan. So, you will have to contribute at least 20-25% of the property value you select.
If you choose to buy a property worth 15 Lac, the bank might give you a home loan of Rs. 10 Lac, the remaining 5 Lac you will need to arrange. You should check your home loan eligibility to know whether you will get the amount you seek or not. Any difference in the loan amount will be going from your wallet or you will have to reduce your overall budget.
Tenure of the Loan:
This is where you will have to decide between lower EMI in the initial period and higher interest payment or higher EMI and lesser term but lower interest payments.
If you require a higher loan than what your EMI affordability allows you to, you can go for a longer tenure. This will decrease your EMI and banks give you a higher loan amount.
Although, you will have to pay more interest in the long run, you can get the loan at an affordable monthly cost now. In this case also, you can reduce the tenure by pre-paying the loan.
Usually home loans come with two kinds of Rate of Interest (ROI), fixed and floating. Fixed ROI means that the interest rate will stay constant for the next 5-10 years and in some cases all through the tenure of the loan.
Floating ROI might change depending on the RBI norms and different Government policies and market conditions. Choose the one that is most suitable for your home loan type.
Charges and Penalties:
Generally there are no extra charges barring the processing fees, legal verification charges in few cases, stamp duty on home loan amount and certain switching charges if you are changing your EMI or transferring your loan to another bank or NBFC. However, there will be a penalty if you fail to make your payment with added interest. Make sure that you are aware of all these charges.