Property is an asset that helps you reap numerous financial benefits. Whether you are looking forward to purchase property for investment purposes or for finding your new home, the banking sector provides many loan opportunities that are lucrative and beneficial. 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 monthly installments and the option to choose the repayment tenure as per your convenience, banks help make your dream of purchasing a home a reality. But, before you begin applying for a home loan, go through these important suggestions that could help ease the application process and simplify loan repayment.
1. Research on Loan Options
With easy accessibility of information on the internet, make an effort to do extensive research on the options available in the market before applying for a home loan. Your research should also include these three crucial factors that formulate a loan, namely, down payment, EMIs, and repayment tenure. Researching on these three factors prior to your home loan application enables you to choose a suitable home loan from a better lender at attractive interest rates. Home loan amounts are also usually larger than other loans, so make sure you explore all the details and uncover every nitty-gritty that comes along before, during, and after the home loan application.
2. Aim at Affordability
While there are plenty of options in home loans for you to choose from, affordability is a large contributing factor that you need to consider before applying. You should be able to not only afford the fixed monthly EMIs, but should also be able to adjust them comfortably within your cost of living. Consider overhead expenses beyond the EMI you choose to pay each month and maintain a steady income outflow to meet any unforeseen emergency. So, while you can always opt for purchasing a house that you like, in a location you prefer, being able to afford the home loan is equally important.
3. Spend Cautiously
A factor that immediately follows the affordability clause is that of monthly expenditure. Once you have a home loan to repay, it is preferable and advisable to follow a strict budget to meet your equated monthly installments. You have to be regular in paying the EMIs to maintain credibility and to avoid an overdue or an increased interest rate. Since spiraling down the non-repayment of a home loan is common, avoid it by channeling your resources towards regular and timely repayment of the loan to gain full ownership of your home. This means spending with caution and postponing any non-immediate purchases. Such a controlled outflow of income would enable you to pay off the debts as soon as possible.
4. Choose Suitable EMIs
The equated monthly installment amount depends on you. Banks offer varied EMI options to cater to and suit different needs of the borrowers. EMIs also depend heavily on the down payment you submit at the time of making a house purchase. The bigger the sum of down payment, the lesser the stress of the outstanding amount being converted into EMIs. It is also best to ensure that your chosen EMI amount does not exceed 45% of your total income.
5. Repayment Tenure
The time you take in paying off the sanctioned loan is considered your repayment tenure. The repayment tenure and your EMIs go hand-in-hand. While opting for a longer tenure might result in smaller EMI amounts, it adversely increases the interest rate to be levied, resulting in you having to pay double or triple the loan amount due to high interest. If you have a stable and recurrently increasing income, and plan a strict budget, it is advisable to choose a short repayment tenure with higher EMIs. Interest rates for such tenures are considerably lower to encourage faster repayment. Banks also offer attractive interest rates for those who decide upon a shorter repayment cycle.
6. Maintain CIBIL Score
Credit score maintenance is an essential requirement to be applying for any kind of loan within the banking sector. Be it a cyclical credit card payment or a loan repayment; regularity pays off well. If you have a CIBIL Score of more than 750, you are liable to extract even better interest rates on your home loan. This is coupled with a considerably higher chance of a quicker loan processing and disbursal.
7. Know Foreclosure Norms
Keeping a keen eye on the changing RBI norms may be advantageous to you on many levels. Foreclosing your home loan by repaying the outstanding amount in less than the committed time saves you from paying any added expenses. The sooner your loan is paid for, the higher your credit score.
8. Home Loan Eligibility Check
It is essential to check your eligibility before applying for a home loan. Documents pertaining your credit history hold utmost importance here.
9. Additional Charges
Apart from the EMIs, there might be other administrative, processing or service charges that banks levy upon borrowers at the time of loan application. Make sure that you discuss these with the lender prior to loan application. Check whether they are one-time charges, or monthly; if they are monthly charges, then they need to be taken into consideration along with your EMIs, and your monthly finances planned accordingly.
10. Read the Documents Carefully
Go through the agreement documentation carefully for an overall and comprehensive knowledge of the loan application.
With all the aforementioned points in mind, seeking a home loan becomes much more simplified.
This Content has originally written by Yes Bank Team. No Copyright/IPR breach is intended.