- January 1, 2022
Buying a home is a huge decision. Once you’ve made that decision, irrespective of whether you are looking for a pocket friendly home or a home that is an oasis of luxury, most people look at home loans to support their purchase.
Currently the market scenario is favorable for home buying as interest rates are less than 7%. Tax benefits make the effective cost of the loan more beneficial.
So what are the 10 Things To Bear In Mind Before Taking A Home Loan?
1. Know What The Market Is Offering
To understand what is the best loan and who is the best lender for you, ensure that you have studied the websites of individual lenders. By comparing information on interest rates, allied charges and other conditions, you will be in a better position to decide.
2. CIBIL Score
CIBIL Score is basically your credit score. It is important to have a good CIBIL Score of more than 750 to be able to enjoy a home loan. For 2bhk & 3bhk homes in Ahmedabad, home loans are quite easy to procure even if you are a first time borrower.
3. Know The Type Of Loan
There are mainly three types of home loans available. These are adjustable/ floating loans, fixed loans and a combination loan. Under fixed home loans EMI’s interest rates don’t vary over the home loan tenure. On the contrary, under floating rate, the interest rate is calculated based on the MCLR and changes over time. This proves to be beneficial when interest rates are expected to decrease. At Sheetal Infrastructure, we advise that you make thorough calculations on the loan interest and then proceed towards freezing your loan amount.
4. Know the loan tenure
Set a goal on the repayment period. This should help you in deciding how long you want the loan to be repaid. This will in turn impact the amount of your EMIs. As observed, banks tend to prefer home loan applicants with shorter repayment periods. Shorter repayment period also means lesser burden on your EMI’s. With a longer tenure, though the EMI may be lesser, it also increases the burden or repayment for an extended period of time.
5. Get A Pre-Approval On The Loan
A pre-approved loan helps to narrow down the search. It makes your purchasing systematic and enables you to make a more informed decision. Therefore we recommend getting a pre-approved home loan before you close the deal on your purchase.
6. Down Payment
This is usually 10% – 15% of the total home loan amount. The remaining home loan amount is converted as home loan EMI which is repayable every month.
7. Home Loan Documents
Don’t forget to thoroughly read all the terms and conditions of the bank you are seeking a home loan from. You should be aware of the allied charges as well as penalties that are mentioned on your home loan document.
8. Foreclosure Norms
This means repaying the outstanding amount before your home loan tenure ends. The sooner your home loan is paid off, the lesser the rate of interest that you will have to pay. Several banks charge a penalty if the loan tenure is reduced and you repay it earlier. With a floating home loan interest rate, you may be able to save yourself this penalty. So it’s advisable to know these norms before you sign the documents.
9. Check External Benchmarks
Very recently the RBI mandated external benchmarking of loans thereby making the pricing of loans more transparent. One banks like their rates to the repo rates, customers can now avail the benefit of reduced interest rates then the RBI reduces its lending rates. Repo rates also help in regulating interest rates when other benchmarks are market driven.
10. Compare Processing Fees
Whether it is a fresh loan, or a balance transfer, comparing the processing fees must not be ignored before you finalize the lender.