Nowadays, one can think of buying their first home in their twenties or thirties itself, thanks to the easy availability of home loans and the rise in income of the working middle class. However, the most important part of achieving the dream of buying a home is to get the right home loan. Hence, we have bundled out the top things that you must consider while availing a home loan.
Top Five Things to Consider While Looking for a Home Loan
- Home Loan Tenure: Any individual who desires to avail a home loan should think and choose the best home loan tenure before applying for it. The home loan EMIs are directly dependent on your home loan tenure. Banking institutions generally prefer home loan applicants with a shorter repayment period. Home loan applicants with a shorter repayment period are also beneficial as it decreases the home loan interest burden on the individual’s EMIs. Though the monthly installments will increase with a shorter tenure but eventually it will help the applicant in decreasing the home loan cost.
- Choosing a Lender with Daily Reducing Balance: Ensure that you opt for a lending institution that offers a daily reducing balance rather than monthly reducing balance. The daily rest method is usually much cheaper than the annual and monthly rest method. This feature can help you save a lot of money in the long run.
- Learning about Floating and Fixed Rates: There are two types of interest rates in general- floating interest rate and fixed interest rate. The floating interest rate is linked with the market and moves proportionately with the base rate. A fixed interest rate, on the other hand, always stays fixed as per the loan agreement. Keeping in mind, the current scenario of economy, floating interest rates is a very good option.
- Understanding the Foreclosure Norms: Do make sure you don’t end up paying more than required or extra while foreclosing your loan. The Reserve Bank of India (RBI) has some foreclosure penalties. Go for a lending institution that does not ask for any pre-payment penalties after a certain initial lock-time period of your home loan.
According to the recent guidelines by RBI, any bank or financial institution is not allowed to charge a pre-payment penalty for home loans. You will be able to make partial payments whenever you have any surplus cash available and will be charged no penalty for this.
- Checkout for Reviews: Check out for reviews of different banks before going for a home loan. If you are not getting any helpful review online, then take feedback and opinion from experienced friends. Seek those friends who might have taken a home loan from several different banks and take feedback and reviews about the interest rates and repayment. Seeking out suggestions and reviews will certainly help in listing the best lending institution for your home loan.
Taking a house is a big dream for all and is a once in a lifetime decision, which makes it essential for you to select the right home loan product available in the market. Those individuals who are interested in availing a home loan and that too for the first time should make themselves aware of a lot of things. Those things include interest rate, several fees related to a home loan, credit score, documentation, and so on. Before selecting the right kind of home loan, one should be aware of all the basic components of a home loan.