Smart Things to Consider Before You Apply for a Home Loan _WC
Smart Things to Consider Before You Apply for a Home Loan
The decision to purchase a home is a big decision. A home not only provides a roof over your head but it is also an asset that offers numerous financial benefits. However, with property prices at their all-time high, it is nearly impossible for the common man to afford a home without seeking financial help. Home Loans provide this help -- they allow potential home buyers to build an asset without exhausting their savings.
If you have been toying with the idea of becoming a homeowner, now would be a good time to take the plunge and buy a house. However, if you are planning to take a Home Loan to finance your purchase, here are some Home Loan tips to help you avail yourself of the right Home Loan deal for you.
Tips and Tricks That Will Help Get the Right Loan Deal for You
Do Your Research
This is perhaps the smartest Home Loan tip you will ever get: before applying for a Home Loan, do proper research and see what each lender has to offer to you. Talk to as many lenders as possible and while assessing lenders, consider not just the interest rate they are offering but also other factors, such as their experience, the added facilities they offer, etc. Decide which Home Loan would be best for you based on the overall package being offered to you and not just the interest rates.
Borrow What You Can Easily Repay
When availing of a Home Loan, aim for affordability. In other words, borrow what you will be able to easily repay. Use a house loan EMI calculator to figure out the EMI amount you can easily afford and borrow just that. Borrowing more than what you can repay can sometimes lead to missed EMI payments, a situation that must be avoided at all costs since late payments attract a late fee and also affect your CIBIL score negatively.
Additional Read: How to Calculate Home Loan EMI
Once You Have Availed of a Home Loan, Be Smart About Spending Money
Home Loans are a huge commitment. Your Home Loan EMIs will take up a major chunk of your monthly income. Therefore, you must spend cautiously and plan your monthly budget in such a way that you always have enough money left to clear your EMIs. Do away with all the frivolous stuff for a while. This will help you become debt-free as soon as possible.
Choose the Right Tenor
To ensure affordability in the long run, you must select the right loan tenor for you.
Long Home Loan tenors ensure affordability but increase the total interest outgo. Short tenors, on the other hand, help one become debt-free quickly but can lead to EMIs becoming burdensome. Ideally, a person should try to find the right balance between EMIs and tenors -- keep your EMIs as low as possible and your tenor also as short as possible.
Make Sure You Meet Your Chosen Lender's Eligibility Requirement
Before beginning the Home Loan application form, go to your chosen lender's website and check their eligibility requirements. Apply only if you meet their eligibility requirements. Candidates who do not meet the eligibility parameters often face application rejection. One must try and avoid Home Loan rejection at all costs since a rejection negatively impacts a candidate's CIBIL score and ruins their chances of availing of a loan in future.
Read the Fine Print
Sometimes, borrowers talk to a lender only about the interest rate, tenor and principal and based on these three things alone, they sign a Home Loan agreement. This is a mistake one should never make. Once you have been approved for a Home Loan, you will get a Home Loan agreement. Sit with a lawyer and discuss each point of this agreement with your lawyer. Sometimes, lenders add clauses about hidden fees and charges. You must dissect each point of the agreement and ensure there are no hidden fees and charges involved.
Additional Read: Home Loan Terminologies You Must be Aware Of
Understand Prepayment and Foreclosure Norms
If you have availed of a Home Loan, keep reading about prepayment and foreclosure norms. Until a few years ago, borrowers had to pay a penalty every time they made a prepayment or opted for foreclosure. However, a few years ago, the Reserve Bank of India changed Home Loan prepayment and foreclosure rules. Today, individual borrowers who have opted for a Home Loan on floating interest rates can prepay or foreclose their loan at no additional charges. Similarly, individuals who are at fixed interest rates can prepay or foreclose their loan at no additional cost if they use their savings to part pre-pay or foreclose the loan. Prepayment and foreclosure journals keep changing in the country. Therefore, Home Loan borrowers must keep an eye out for these rules.
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Tips to Consider Before Applying for a Home Loan _RAC_WC