Almost all people quest for their own house. Even if people have a house to live in for which they pay rent, still they feel the need to buy their own house. In recent times, homes have gained importance for obvious reasons. And these all reasons are enough to explain to us why people go for a home loan.
But while doing so, we often forget the important things that need to be checked which are as under:
Interest rate: You should compare the interest rates of different banks for a home loan. Banks provide fixed and floating interest rates. As the name suggests fixed interest rates do not change. While floating interest rates differ. When there is an expectation that interest rates can go down, then you should go for a floating interest rate. In case if the expectation is it can increase, it’s better to go with a fixed rate.
Tenure: This is the most important factor that needs special attention. Tenure for home loans is generally long. They can be extended to 20 years. While determining the tenure, you should consider other factors like your age, income prospectus, etc. Shorter tenure will be suitable for savings. It can also help in fulfilling your financial goals. You can use the EMI home loan calculator before applying for a loan.
Down payment: As per the norm, lending institutions can offer a part of the cost in the form of a loan i.e. 75 to 90%. Another amount has to be paid by the purchaser. Here, you have to decide how much money you can pay from your savings. If possible, pay a higher payment as a down payment as it will increase your chances of getting property and will reduce financial burden up to some extent.
Associated charges: Along with interest, borrowers have to pay other charges like processing fees, late payment penalties, and foreclosure charges. Foreclosure or prepayment charges are only applicable for fixed-rate home loans. It helps in reducing tenure. It can help in saving a great amount of money. Proper information should be obtained from a lender regarding all these charges.
Credit score: Before applying for a loan, you must check your credit score. A score above 750 is considered to be good to avail of any type of loan. If you have any debt unpaid, then you should pay it as soon as possible and should try to build a good score before applying for a loan
Loan options available: Before applying for a loan, you should check the interest rates, EMIs, and repayment tenure of different banks. It can help you in making a wise decision.
A home loan is a big-time responsibility. It will affect your finances for the long term. So, before going for it, all the rules and regulations should properly be checked along with the above factors.