A home loan is a great form of financial assistance if you are short on cash or are not in favour of liquidating your savings. With easy EMI and other options to choose a repayment tenure at your convenience, banks help make your dream of purchasing a house a reality. Whether you are looking forward to purchasing a property for investment purposes or finding a new home, with the easy availability of financing options, this massive expense can be easily carried out even for first-timers.
But, before you apply for a home loan you must go through these important suggestions that could help you ease the application process and simplify the loan repayment.
A credit score is one of the most essential factors which banks consider before giving out any loans to their clients. Thus, any individual who needs a home loan should maintain a good credit score. An important CIBIL score of more than 750 needs to be maintained to be able to avail of a home loan and earn better interest rates. Maintaining a good credit score is not an insurmountable task and can be achieved by timely repayment of the said loan.
The second step is to consider the home loan interest rates. Every individual applying for a home loan needs to be aware of the ongoing interest rates. Anyone who wants a home loan needs to first compare different lenders for the lowest interest rates. Furthermore, one should also understand the difference between the two types of interest rates i.e Floating and fixed. The EMIs don’t vary over the home loan tenure under the Fixed Home Loan Interest. But, under the floating rate, the interest rate is calculated based on the MCLR and changes over time which proves to be beneficial as interest rates are expected to fall in future.
Home Loan Tenure
The third option that people need to consider is the tenure within the home loan is repayable. Your home loan or EMIs directly depends on your home loan tenure. Banks prefer an application that can repay the amount within a short period. A short repayment period is also beneficial as it decreases the burden of the interest on the EMIs. Furthermore, with shorter tenure, your monthly installments will increase but eventually lead to a decrease in the cost of your home loan.
Home Loan Options
With growing technology and easy accessibility of information on the internet, you must do extensive research on the options available in the market before applying for a home loan. Divide your research into three parts, namely, down payment, EMIs, and repayment tenure. Researching these three factors before applying for a home loan helps you find a more suitable lender with affordable interest rates.
Equated Monthly Installments (EMI)
Equated Monthly Installments are the payments that a borrower needs to make every month towards the repayment of the home loan. The EMI amount usually depends on you but it also depends on the down payment you make while purchasing the property. The more the down payment amount, the lesser is the stress of the outstanding amount which will then be converted into EMIs. It is always recommended to ensure that your EMI amount does not exceed 45% of your total income.
Home Loan Documents
Before applying for a home loan, you should always read the terms and conditions of the bank or any financial institution carefully before signing the papers. You should be aware of the different charges, fees and penalties mentioned in your home loan document.
Generally, when you apply for a home loan, you are required to pay about 10% to 15% of the total home loan as the down payment. The rest of the outstanding amount is then converted into your EMIs, which you have to pay every month. If you have surplus cash available, you can increase the down payment amount as it will help you save on the interest that is to be paid in the future.
Apart from your home loan EMIs, banks and financial institutions may charge any additional fees at the time of application. Make sure that you discuss these charges with your bank or any other financial institution beforehand.
Foreclosure of a home loan means making the repayment of the outstanding amount before the home loan tenure ends. The sooner you repay your home loan, the lesser interest you pay. Banks usually charge a foreclosure penalty for repaying a home loan before the tenure ends. With a floating home loan interest rate, your bank or financial institution will not charge any foreclosure penalty.
Home Loan Eligibility Check
Lastly, it is imperative to check your eligibility before applying for a home loan. Documents related to your credit history are essential. Many banks today provide eligibility criteria for a home loan on their websites.