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4 Key Aspects To Consider Before Availing a Home Loan

IndianMoney.com Research Team | Updated On Saturday, June 15,2019, 02:43 PM

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4 Key Aspects To Consider Before Availing a Home Loan

 

 

Banks offer home loans to help people buy a property or a house. Home loans or housing loans are an important form of financial assistance, if there is a shortage of funds while buying the dream home. They are a long-term commitment and therefore, a borrower must be well aware of the terms and conditions of the home loan. The rules apply to both first-time and existing borrowers.

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4 Key Aspects To Consider Before Availing a Home Loan

To be financially safe, do remember the following key aspects prior to locking a home loan:

Eligibility Criteria

Banks have their own eligibility criteria while sanctioning the home loan. You must first visit the bank branch in person or the official website to understand the eligibility criteria. This is mainly income, age, credit score, the nature of employment, job stability, the number of dependents and so on. A thorough understanding of the eligibility criteria helps get that home loan sanctioned. Say, if you are over 50, banks may insist on a co-applicant. Maintain a good credit score to get the home loan sanctioned.

See Also: What Is My Home Loan Eligibility?

Understand the Loan Types

Banks currently offer floating rate home loans, fixed rate home loans and a combination of these two. The rate of interest, in case of floating rate home loans, is linked to the benchmark rate of the lender (This is the MCLR or the lending rate below which banks don’t lend); and in case of fixed rate home loans, the interest rate remains unchanged across the home loan tenure.

When you choose a combination loan, the loan amount is reset to an adjustable and fixed rate of interest. Compare the loan types and avail the one that matches your needs.

Loan Amount and Tenure

NBFCs and banks finance up to 75-90% of the property costs. If a property is valued at Rs 60 Lakh, the bank finances up to Rs 48 Lakh (80% of 60 Lakhs). You have to finance the remaining amount, yourself. If you want to keep your Home Loan EMIs low, opt for a longer tenure. Choosing a longer tenure means more interest payments which increases the cost of the loan.

For example, for a home loan amount of Rs 25 Lakhs at 8.60% for tenure of 20 years, the EMI comes to around Rs 21,854, and when the loan tenure reduces to 15 years, the EMI increases to Rs 24,765. Budget your long-term expenses. Select the loan amount and tenure accordingly.

See Also: Home Loan Interest Rates

Documentation

  • Property Documents: Property documents are an important part of the loan agreement. They consist of the title deed, sale deed, encumbrance certificate and so on. Lenders do the due diligence on the basis of these documents.
  • KYC Documents: KYC documents encompass address and identity proof, which can be a valid passport, an Aadhaar Card or Voter Card.
  • Income Documents: Income documents help your banker assess creditworthiness. Salaried people are expected to submit the salary slips for the last three months.

Final Word

Select the bank where you avail the home loan with utmost care and make repayments in time. While minor defaults may have an adverse impact on a borrower’s credit score, major defaults may cost you the dream home.

See Also: Ready For A Home Loan

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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