The decision to buy a new home abundantly relies on the home loan amount you can avail. But when you apply for home loan, there are many things that you should keep in mind to make sure that you get the loan at a competitive interest rate and without any errors or inconveniences. We have listed five such important things in this post.
Most of the people in India rely on a home loan to buy a house. While there is no denying that the real estate price, especially in metro cities like Mumbai are very high, financial institutions in India are trying their best by offering affordable home loans to help you achieve your dream.
But when it comes to taking a home loan, the full documentation and paperwork can make the process very daunting and time-consuming. And it is important to be careful throughout the process as a home loan is a very long-term association with the lender that can last for several years and involves repayment of lakhs of rupees.
To make things easier, we have created a list of 5 important things that you should keep in mind when you apply for home loan.
The EMI is the most important consideration for every home loan borrower. It is the amount that every borrower pays on a monthly basis to repay the loan. Avoid pushing yourself by believing that you will surely earn more in future and can afford a higher loan amount or EMI. As per experts, the monthly EMI should not be more than 40%-45% of your in-hand income.
- Loan Tenure
The next important thing is the loan tenure. You can opt for a shorter tenure if you can pay higher EMIs else, you need to have a longer tenure in case your loan amount is big, and you can’t afford to pay higher EMIs on a monthly basis. Lower EMI and longer tenure mean that you will pay more overall interest on the loan.
Rather than going for a shorter tenure and an EMI which you are not sure you’d be able to afford on a monthly basis, it is better to consider the affordability of the EMI. If you start earning more in future, you can get the EMI increased or prepay the loan.
- Down Payment
Lenders usually grant 80%-85% of the total cost of the home as a loan. You need to pay the rest as a down-payment. So, make sure that you have the necessary funds in place to make the down-payment as the loan amount will only be granted once you pay the down-payment.
The lenders in India have their eligibility requirements for a home loan which slightly vary from one another. Make sure that you check the eligibility criteria of your lender and ensure that you are eligible for the loan to avoid any inconvenience at a later stage.
When you are eligible, you also get the opportunity to get the interest further reduced on loan. While there is no guarantee that the lender will reduce the interest even if you are perfectly eligible for the loan, it is still worth trying.
- Penalties and Charges
You must be aware of the additional charges, like processing fee, penalty on default, charges for prepaying the loan or for switching to another lender, etc. Rather than taking the word of an executive, it is better to get all the charges and penalties in writing from the lender.
Keep the points mentioned above in mind when applying for a home loan and the process would surely be smooth and quick.