Purchasing a home by availing a home loan helps you make the most of low real estate rates and festive offers. However, for your home loan to be a truly affordable affair, it is essential you treat this financial decision with caution. This involves carefully reviewing important aspects of your home loan before you sign the contract. Take a look at all you need to pay attention to before signing your home loan deal.
Check the Eligibility Criteria
While considering a home loan, it is important to review the eligibility criteria for it and making sure you meet them. This is because the loan amount you can avail of and the home loan interest rate you get is based on your eligibility. Lenders consider your credit score, job stability, income, age, other financial responsibilities, and more while judging the risk involved in lending you money.
Most lenders prefer if the EMIs you pay doesn’t exceed 40%–50% of your salary. In this case, a lender considers your salary as the in-hand amount you receive post deductions. Lenders also consider your existing debts and the number of dependents you have. This is why it is important to check your personal eligibility instead of focusing on numbers mentioned numbers in common offers. Use the home loan eligibility calculator to see the amount you are eligible for before proceeding with the application.
View Various Interest Rate Offerings
Interest rates are of two types, fixed and floating. You can choose the type of interest rate you want on your home loan before applying. While a fixed interest rate remains the same throughout the tenor, a floating rate of interest is subjected to any change in the market and can rise or fall based on the fluctuations. It would be wise to have your lender walk you through this part of your home loan deal to understand what kind of home loan interest rate you should opt for.
Also, if you are choosing a floating rate of interest, inquire with your lender about what happens if there are any fluctuations in the interest rate. While most lenders tend to increase your tenor instead of increasing your EMIs when the interest rate has increased, you can talk to your lender about your preference. Further, you can even negotiate for a better interest rate with your lender, especially when you have a high credit score or are buying a property that is set to increase in value in the near future.
Weigh the Added Benefits
In many cases, you may feel like sticking to your bank or choosing the lender providing you the lowest interest rate. However, remember that the interest rate and affordability of the loan can change when your profile is taken into consideration as you may not score full points in each eligibility parameter. So, it is best to opt for lenders that offer added benefits along with nominal interest rates. These can make repayment easier on your pocket.
For instance, some NBFCs offers home Loans up to Rs.5 score at competitive interest rates with benefits like online account management, zero part pre-payment, and foreclosure charges, and customized insurance schemes. In addition, you get the flexibility or freedom to choose the tenor of your loan as per your requirement. This gives you enough time to plan your finances and to be able to repay your home loan effortlessly. You can also enjoy zero hidden charges when you avail a home loan with this leading NBFC.
Opt for a Shorter Tenor if Possible
While a longer tenor means smaller EMIs, it would be wiser for you to choose a shorter tenor. Despite having to pay a higher EMI when you choose a shorter tenor, you can benefit from getting debt-free faster. This is because shorter tenors mean your overall interest is lower. Use a home loan EMI calculator to preview the financial impact based on the tenor you choose. It is important to remember this if you are planning to take a home loan on a floating rate of interest. Most lenders tend to automatically increase the tenor instead of increasing your EMIs to adjust the changes. However, speak to your lender and try to shorten your tenor to save on interest. The saved amount can help you pay off your home loan faster and attain financial freedom quickly.
Read the Fine Print Carefully
Your loan agreement contains information about the repayment terms and specifies any hidden charges incurred over the course of the loan. Be prudent by reading through the fine print carefully and ask your lender to explain any clauses you find difficult to understand. This way, you will also be able to understand if the home loan is ideal for your financial needs and if the lender is offering you a good deal. Some lenders have hidden clauses that make you liable to pay additional security in case the property prices drop. Other lenders define default as the demise of the borrower or even divorce in terms of joint loans. It is important to be well acquainted with this and other related information a lender may have mentioned in the fine print. You can also determine whether the lender is charging you for pre-payment or foreclosure of your loan. Only when all terms meet your approval, should you sign the home loan contract.
Keep the above in mind while signing your loan deal to ensure it suits your pocket. You can also view the loan offers you are eligible for and look at a loan deal customized for you by checking your pre-approved offers. You can use loan aggregators – third-party lenders who let you compare and choose a suitable scheme for yourself before applying for it. These websites let you check customized pre-approved offers on personal loans, EMI financing, and other financial services too. Use these smart financing options to your benefit and fund all your life needs with ease.
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