This is deliberately built not to make you lose the chance to fulfill these visions without needing to spend all the money up front. It may seem like a complicated process to take a home loan though. There are several aspects that apply to a home loan you need to learn before you take a loan. The most notable are listed below:-
- The factors that may affect the eligibility criteria: Calculating the EMI is the best way to calculate your eligibility for home loans. In general, banks limit the amount to 40 percent and 50% of the borrower’s income-including the basic salary and the dearness allowance. It also looks to a borrower’s credit history. So if you have any existing loan or poor credit score, the loan amount will further decrease, or you may have to pay a higher interest rate on the home loan. People with a steady wage, a high repayment potential, and a decent credit score consider it comparatively simpler to get a loan than those with volatile earnings and weak credit records do. Finding a co-applicant always helps you conveniently secure a home loan.You can get additional information find this article.
- Understand your type of loan: Banks offer two types of interest-bearing home loans-the fixed interest loan and the floating interest loan. The fixed interest loan is a form of home loan where interest rates stay the same, and borrower will pay a constant EMI over the lending period. On the contrary, it varies more frequently in the case of a floating interest rate according to market conditions which lead to fluctuation in EMI amount. That’s why home loans with fixed interest type have a higher interest rate of 1 to 2.5 per cent than floating interest loans.
- The interest rate: No matter what type of home loan you choose, don’t forget to negotiate on the rate. Although the banks would always have an edge, you ‘re going to have to haggle about that, especially if you’ve been a loyal bank customer and have savings account in the same bank. Bargaining would be much easier if you had a clear credit history. Furthermore, once you pay for the loan at the end of the month, you will still be benefitted. Although the banks have business priorities, they will at this point be more versatile if they want the market.
- The fine print: A home loan arrangement is a legal contract and contains all the loan information. If you think that failing to pay the EMI on time will only cause trouble, you are wrong! A lot of clauses are hidden in the fine print. Thus it is recommended to carefully read the final papers of the loan agreement before signing the dotted line. Be careful about the loan processing fee, penalty fees, hidden clauses, service fees and the penalty for prepayment, etc. In this context, any negligence would lead to bigger problems in the future.
- Longer loan term means more expensive loans: the longer the loan holding, the more interest you are likely to pay over a period of time, as a general rule of thumb. Many can afford this upsurge but not everybody can. It is therefore wise to apply for a loan amount which you can easily reimburse in the shorter tenure. You may have to pay huge EMIs this way, but for a shorter period of time and without increasing the interest rate.
These are quite a few things you should bear in mind when applying for a home loan. Remember even if you have a loan from one bank, that doesn’t mean you ‘re trapped there until the loan is paid out in full. There’s still the chance to move. In this transfer phase you actually have to pay the transaction cost and also the fine for the pre-payment (if paid by your current bank).