The process of applying for a home loan may seem scary if you get into it unprepared, but if you have braced yourself up in advance and follow the required steps then it may sound easy to get your home loan application approved.
Well, applying for the loan in a right way is not all that is needed. You are also required to act smart and apply for a home loan deal that suits you best.
Under this article, we will talk about the tips that will help you lock the best home loan deal for yourself.
So, before you apply for a home loan, take into consideration these key tips:
Those who lend the money usually define the rate of interest in a minimum or maximum range and the actual rate they charge depends on your eligibility criterion. Being a borrower, you have the advantage to negotiate a better rate of interest.
According to financial advisers, you can do this not only by comparing the loan options available for you but also by improving your chances of becoming eligible by adding a co-borrower and combining the income of the co-borrower with your own.
Before you choose to buy any particular loan, indulge in an intensive research work and compare all the options of the different types of loans available in the market. Know about the equated monthly instalments, available interest rates, processing fee, and other related charges.
The emergence and development of technology have made the process of comparing much easier for you. Now you can compare between different types of loans available by accessing the internet at the ease of your comfort zone.
So, always look at the base rate, margin offered, maximum tenure offered, how eligibility is calculated and most importantly if the lender has earlier funded the property similar to yours.
Home loans are available in return for the rate of interest. So, before applying for a loan always finds out the type of rate of interest you will be required to pay.
If a home loan is based on the fixed rate of interest then the interest rate will not change during the entire loan tenure and the borrower is required to pay the same EMI throughout the loan term.
Under the floating rate, bank loans are linked to the MCLR whose rate of interest automatically changes after a fixed period of time.
If the interest rate is expected to fall in the near future then you should go for floating rate and if it is expected to rise in near future then you should opt for a fixed rate loan.
You can pre-close the loan ahead of its actual tenure. If your loan is based on a floating rate, no charges will be applicable but if you are on a fixed rate loan, there may be charges applicable.
Most of the time people decide to pay high EMIs thinking that the loan amount will come down with time due to increase in their income. It is important to understand that this does not happen all the time. Your income may or may not increase with time. Therefore, understand your borrowing capacity and borrow under your limit where paying the EMIs will not stretch your finances.
When you decide to apply for and take a home loan, never forget that interest is not the only cost which you have to bear. There are certainly other costs too.
Each time you apply for a loan with a bank or any other non-banking financial institution you are charged a certain percentage of the loan amount that you wish to borrow. The percentage charged is known as the processing fee. This amount may vary from 0.5 percent to 1 percent of your total amount of loan.
Banks or NBFCs also charge legal fees to ascertain the legal status of the property. Usually, the legal fees are applicable on either a loan against property or on a home loan.
In fact, depending on the type of loan you wish to borrow, you will be charged a fixed amount for the pre-payment of your loan. In case you do not repay your loan EMIs on time, a late payment fee is charged. The late payment fee depends on the financial institution that has lent you the money and the type of loan you have borrowed.
Ankita is a freelance writer who writes about finance, loans, credit cards and insurance.