Factors for getting a Home Loan
All banks and financial institutions give home loans. You should consider certain factors before zeroing in on a home loan. We have discussed some of these factors here for your easy reference
Rate of Interest
It is the most crucial factor to consider while taking a home loan. The lower the interest rate, better it is. Lower interest rate reduces your monthly EMI payment, which in turn is pocket friendly for you. Also, a lower interest rate ensures that your payment towards interest is reduced and payment towards principal repayment is increased.
Fixed or floating rate of interest
Banks charge certain amount as processing charges to process your home loan. Further, there are charges towards getting the due-diligence of property and legal fees. Some bank also charge administrative charges while disbursing home loan. Inquire from the bank regarding all these charges before proceeding further.
Guarantor is a person who undertakes to pay back your loan in case you default in payment. Many banks insist for a guarantor before disbursing home loan. Make sure that you have someone who is willing to become guarantor to your loan.
There may be times when you have surplus funds in your hands and you want to utilize those funds by depositing them in your loan account over and above your scheduled EMIs. Please check that there is no prepayment charges when going in for a home loan. Many nationalized banks do not charge pre-payment charges these days.
Banks often finance app. 80%-85% of the cost of acquisition of property. The purchaser is required to arrange the balance amount on its own. This amount is known as margin money. You should have margin money available once you decide to take a home loan.
Your EMI will depend upon the tenure of your loan. Higher the tenure, lower the EMI and vice-versa. Choose an EMI that best suits your pocket.
You need to decide the time horizon within which you can repay the loan. A loan with a longer tenure will involve higher interest payout. Choose your tenure smartly so that your interest payout is reasonable. Generally, home loans are availed for a tenure up to 20 years depending upon the repayment capacity.
Fixed interest rate is constant whereas floating rate keeps on changing. Fixed interest rate is normally higher than floating rate. Normally, banks offer loan at floating rate of interest. It is recommended that you go for a floating rate, as it is less than fixed rate and with economic boom, interest rates are expected to come down further in future.