Owning a house is, financially and emotionally, an extraordinarily critical yet necessary investment decision that one takes in their lifetime. A home loan lets you own a house without paying for it all at once. You can make part-payments in easy monthly installments. After doing an eligibility test, individuals can easily avail of this type of loan from banking institutions and NBFCs. The best home loan comprises a huge amount borrowed to purchase a housing property. Due to this, one should do a thorough reading and research of the particulars related to this loan.
One wrong step can lead you to pay higher interest rates and increase the overall amount of the loan, which can increase the burden of repayment. Before you move ahead with your decision to buy a home through a home loan online apply, there are several factors that you should know while taking this loan so that you don’t regret your decision later. This article will help you learn about those factors in detail.
- Interest rate:
The rate of interest plays the most significant role in any type of loan as it directly affects the ability to repay. For low-interest home loans, one must be aware of the interest rates of different home loan finance companies. Besides the rate of interest, also be mindful of the type of interest rates offered by different banks and housing finance companies.
- Fixed Rate of Interest: With this type of interest rate, the interest remains unchanged throughout the tenure of the loan. Since the interest rate in this type of rate of interest is constant, the EMIs also do not change. If you choose to pay your EMIs with a fixed interest rate, the interest is high as compared to the floating rate of interest, but an increment in the rate of interest will not affect your EMI amount.
- Floating Rate of Interest: This type of interest rate changes throughout the tenure with changing market trends. The EMIs also change with the changing interest rate. It is suggested that you opt for a floating interest rate if an increase or a decrease in the interest rate does not affect your ability to pay back the dues.
- Mixed Rate of Interest: It is a type of interest rate combining fixed and floating rates of interest. Several lenders nowadays offer this rate of interest where you can switch the type of interest rate to fixed. It could be a rational choice to choose this interest rate for the repayment as it allows you to anticipate and plan your repayments before the lending rates change.
- Home Loans: Fees and Charges:
Before applying for an instant home loan, you should learn about the fees and charges that are related to this type of loan. Every loan levies some fees and charges at the time of application and in case of late repayments. The following are some of them that one needs to keep in mind while taking a home loan.
- Processing fees,
- Late payment charges,
- Pre-payment charges
- Conversion charges,
- Legal Fees,
- Administrative Fees,
- Statement of loan/Account.
- Late or No repayment:
When deciding to apply for a home loan, know if you will be able to repay the dues on time in the future. Making late repayments can charge you late fees, increasing the loan amount. Late payments or no repayments also affect your credit score unfavorably. If you continue doing this, the lender can take legal action against you and even sell your property to recover their dues. Hence, it is suggested that if you face any financial difficulty while making the repayments, try resolving it by negotiating with your lender on the lending terms.
- Documentation:
When you apply for any kind of loan with a bank or a financing company, you need to submit certain documents. These documents have to be submitted so that the lender can verify the details given by you and do an eligibility test. Besides the documentation, credit score also plays a vital role in approving a loan. The loan process becomes easier if you have a credit score above the average. Also, individuals with good credit scores get the best home loan offers from various banks and financing companies.
- KYC Documents: These are the documents generally asked to verify personal details such as address and identity proofs. At the time of application for approval of the loan, the banks and NBFCs ask for passports, AADHAR Card, PAN Card, Driving Licenses, Voter IDs, etc., as address and identity proofs.
- Income Documents: The documents might differ in the case of salaried and self-employed. These documents include the last three months’ salary slips, Bank A/C Statements, ITR, Income computed for the last three years, etc.
- Property Documents: Before the approval of the loan, the lender does a vigilant check on the property where you have to submit the documents related to the housing property, such as an agreement to sell the title deeds etc.
- The loan amount, tenure, and down payment.
The loan amount, tenure, and down payment are essential parts of a home loan. It directly affects the ability of the customer to repay the dues. Home loans are oversized loans of long duration where if the loan amount and duration are not appropriate for the customer, it can lead to a default on the repayment of dues.
- Loan Amount: The loan amount should not be more than the ability of the customer to repay as it can lead to delay and defaults in the repayment, which affects the credit score negatively. A bad credit score can stop you from availing of loans in the future.
- Loan Tenure: The tenure of the loan is generally of a long duration of up to 30 years. Long-duration home loans have low EMIs, whereas short-duration home loans have higher EMI amounts, which can lead to an increased repayment burden. Therefore, it is suggested that you choose the best house loan tenure to make your monthly instalments hassle-free.
- Down Payment: The amount you pay immediately after the sanctioning of the loan is called a down payment. You can pay the down payment as per your willingness without stressing your budget. It helps to reduce the loan amount.
Conclusively, it is always advisable that before you apply for a housing loan, you should check on all the details related to it as it can help you get better offers and deals that will lower your loan amount. There are multiple banks and housing finance companies offering home loans these days. Choose the one that suits your requirements and needs. A home loan is a big financial step, do a thorough read and research of the above-mentioned factors beforehand.
