These have been specifically designed to not let you miss on the opportunity to make such dreams come true without having to pay all the money up front. However, taking a home loan may seem a complicated course of action. There are many factors associated with a home loan that you need to know before taking a loan. The most noticeable ones are listed below:-
1. The factors which may affect the eligibility criteria: The best way to calculate your home loan eligibility is by calculating the EMI. Generally, edges limit the amount to 40 and 50% of the borrower’s income – including the basic salary and the dearness allowance. It also considers the credit history of a borrower. So if you have any existing loan or a poor credit score, the loan amount will be decreased further or you may have to pay an increased rate of interest on the home loan. People with a stable income, strong repayment capability and good credit score find it comparatively easier to get a loan as compared to those with inconsistent earnings and poor credit history. Also having a co-applicant allows you to get a home loan easily.
2. Understand your loan kind: edges offer home loans in two interest types – the fixed interest loan and the floating interest loan. The fixed interest loan is a kind of home loan where the interest rates keep same and borrower has to pay a fixed EMI throughout the loan tenure. On the contrary, in case of a floating interest rate, it varies as per the market conditions that rule to fluctuation in EMI amount more often. This is why home loans with fixed interest kind have 1 to 2.5% higher interest rate than floating interest loans.
3. The interest rate: in any case home loan kind you choose, do not forget to negotiate on the rate. Though the edges would always have an edge, you’ll have to haggle on this, especially if you have been a loyal customer of the bank and have savings account in the same bank. The negotiation would be a lot easier if you have a clear credit history. Besides, you may also be benefitted if you apply for the loan at the end of the month. Since the edges have business targets, they can be more flexible at this time if they want the business.
4. The fine print: A home loan agreement is a legal document that has all the details of the loan. If you think that not paying the EMI on time will only rule to troubles, you’re wrong! There are many clauses hidden in the fine print. consequently it is advised to read the final papers of the loan agreement carefully before signing the dotted line. Be careful about the loan processing fee, penalty charges, hidden clauses, service charges and the prepayment penalty, etc. Any negligence in this context would rule to bigger problems in future.
5. Longer loan term method costlier loans: As a general rule of thumb, the longer the tenure of the loan, more will be the interest you are likely to pay over a period of time. Many can provide this rise but not everyone can do so. consequently it is wise to apply for a loan amount that you can easily payback in the shorter tenure. This way you might have to pay huge EMIs but for a shorter duration and without propping up more interest rate.
These are quite a few things that you must keep in mind while applying for a home loan. observe that if you get a loan from one bank doesn’t average you are stuck there until the time your loan is fully paid. You always have the option to switch. You just have to pay the processing fee in this switching course of action and also the pre-payment penalty (if charged by your current bank).