These have been specifically designed to not allow you to miss on the opportunity to make such dreams come true without having to pay all the money up front. Nevertheless, taking a house loan could seem an advanced process. There are a lot of factors associated with a house loan that you should know before taking a loan. Probably the most prominent ones are listed beneath:-
1. The factors which might have an effect on the eligibility criteria: The best way to calculate your property loan eligibility is by calculating the EMI. Usually, banks limit the amount to 40 and 50% of the borrower’s income – together with the fundamental salary and the dearness allowance. It also considers the credit history of a borrower. So in case you have any existing loan or a poor credit rating, the loan amount will be decreased further or you will have to pay an increased rate of interest on the home loan. People with a stable earnings, robust repayment capability and good credit rating find it comparatively simpler to get a loan as compared to those with erratic earnings and poor credit history. Additionally having a co-applicant lets you get a home loan easily.
2. Understand your loan type: Banks supply home loans in two curiosity types – the fixed interest loan and the floating interest loan. The fixed curiosity loan is a type of residence loan the place the interest rates remain similar and borrower has to pay a fixed EMI throughout the loan tenure. On the contrary, in case of a floating interest rate, it varies as per the market conditions that lead to fluctuation in EMI quantity more often. This is why residence loans with fixed curiosity type have 1 to 2.5% higher interest rate than floating interest loans.
3. The interest rate: No matter residence loan type you choose, do not forget to negotiate on the rate. Although the banks would always have an edge, you will should haggle on this, particularly if in case you have been a loyal customer of the bank and have savings account in the identical bank. The negotiation can be a lot simpler you probably have a clear credit history. Besides, you might also be benefitted for those who apply for the loan at the end of the month. Because the banks have business targets, they are often more flexible at this time if they need the business.
4. The fine print: A house loan agreement is a legal doc that has all the main points of the loan. In the event you think that not paying the EMI on time will only lead to troubles, you’re mistaken! There are lots of clauses hidden in the fine print. Thus it is advised to read the ultimate papers of the loan agreement careabsolutely earlier than signing the dotted line. Be careful concerning the loan processing charge, penalty charges, hidden clauses, service costs and the prepayment penalty, etc. Any negligence in this context would lead to bigger problems in future.
5. Longer loan term means costlier loans: As a common rule of thumb, the longer the tenure of the loan, more will be the curiosity you might be likely to pay over a interval of time. Many can afford this rise but not everybody can do so. Subsequently it is sensible to apply for a loan amount that you could simply payback in the shorter tenure. This way you might need to pay large EMIs however for a shorter length and without propping up more interest rate.
These are quite a number of things that you could keep in mind while applying for a house loan. Note that if you get a loan from one bank doesn’t mean you are stuck there till the time your loan is totally paid. You always have the option to switch. You just should pay the processing price in this switching process and in addition the pre-payment penalty (if charged by your current bank).
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