Before investing in property and getting a home loan, it is important to research all factors such as market conditions, growth potential and personal finances. Is it the right time to buy the property? What is the current state of the real estate market? Will the investment prove lucrative in the future?
Look into your assets and calculate how much you are going to have to invest upfront and on a monthly basis. It is best to purchase the highest quality home that your budget can afford. Having a loan pre-approved would be the best thing to do before you head out to look at properties.
Read The Fine Print
Homebuyers would never finalize the purchase of a house without thoroughly inspecting the property. But many details of a home loan agreement may go unnoticed in the fine print. Many borrowers assume that loan agreements are standard contracts and all that has to be assured is adherence to the repayment schedule. In the moment, we forget that a home loan is a long-term contract that has a continual impact on your finances throughout its tenure. Reading the fine print in the agreement is what safeguards you from unpredictable events and scenarios.
Allowing Amendments
An important point in a home loan agreement that is often overlooked is a clause that allows amendments to the loan agreement. This may be against the borrower’s interests if the power to alter the terms of the contract lies exclusively with the bank. This is especially important in the event of difficulty in repayment of the loan. The borrower should ensure that their written consent is mandatory to alter the terms of the loan agreement.
Fluctuating Interest Rates
Another point to consider is the clause regarding fluctuating interest rates. This clause allows the bank to alter payable interest rates as per fluctuations in the applicable base rates. So when the market rates increase, the bank can increase the interest rates. This effectively changes fixed-rate loans to floating-rate loans. The borrower should ensure that the interest rate terms are safeguarded in the loan agreement.
Get An Expert Opinion
Terms included in the fine print of home loan agreements are generally in favor of the bank. Therefore it is imperative that borrowers thoroughly read and understand the implications of the entire contract, preferably with the aid of an expert. This is especially important at this time as home loans and other forms of financial assistance are easily available. It is wise not to rush through this process.
Special Clauses
A few clauses to look out for include the security cover clause which makes the borrower have to provide additional security to mitigate the outstanding loan amount. If the borrower has other active loans from the same financial institution, there may be a clause that allows for adjusting the loans against each other. Repayment may not go towards the particular loan that was intended. Also, understanding the terms and conditions will prevent the surprise of any additional hidden charges that may not be apparent. Most importantly, there should be a clause that clearly states the definition of default, the situations under which it may arise and its implications.
The Right Property
The main factors that determine your home loan eligibility are credit history, age, professional background and income. Beyond these factors, it is also important to consider the attributes of the property itself. Banks conduct a technical evaluation of the property while considering your home loan application. Factors such as the age of the property, its market value, the surrounding locality and whether the builder provides all compliance certificates and documentation all impact your home loan eligibility. Properties from builders with a proven background and established partnerships offer better chances of home loan approval.
