What Should You Keep in Mind When You Seek a Home Loan?

What Should You Keep in Mind When You Seek a Home Loan?

A home loan is a long-term commitment, at least for 10-15 years. While buying your own home can be a dream come true, you need to be prepared to make this commitment. If you are thinking home loan kaise le or whether to take it, here are certain factors to keep in mind.

How Much Home Loan to Take?

The cost is the first issue to address when you think home loan kaise le. When deciding on the loan, keep in mind that your EMI should ideally not exceed 40% of your salary or total income in a month. If you have other loans running simultaneously, your total EMI shouldn’t exceed 50% of your monthly income.After all, your home loan should spare the money you need for necessities as well as to meet your regular investments. You can consider cutting down on some luxuries though. If you stretch your finances too much with high EMIs, you could face a financial crunch during contingencies. While deciding on the amount of home loan, evaluate your monthly expenses and investments, keeping aside some savings for emergencies, then determine the EMI and calculate the loan amount accordingly. In case you are buying an already constructed home, you may need money for renovation. Before you include the amount in the home loan, remember to check home renovation loan interest rates.

Compare All Costs of Home Loan

While the interest rate is the first thing to check, don’t forget the processing fees and administrative charges. You should also check foreclosure charges and penalties for late EMI payments. Once you have all this information, you can make a comparison. Here’s what you need to know about some of the charges:
  • The home loan processing fee varies from 0.5% to 2% across lenders.
  • The foreclosure charge refers to the penalty for prepaying your loan. This is important because prepaying your home loan can save a lot on interest payments.

Don’t Ignore the Fine Print

Before you sign the loan agreement, read the fine print very carefully.Doing so may reveal various aspects of the home loan, especially, hidden charges, unfavourable terms, and reasons for penalty, which can lead to financial loss or harassment in the future. Consider seeking help from a lawyer or ask the bank’s representative to guide you about the EMI breakup, other charges, and various terms and conditions. Once you are completely sure of what you are getting into, only then sign the agreement. It may take a few more minutes, but at least you will have peace of mind.

Compare Home Loan Offers from Different Banks

If you have maintained a good credit score, fall under the higher income bracket and/or are employed by the government or one of the country’s leading companies, many banks may approach you for promoting their home loans. However, to make a sound decision, it’s best to compare the offers based on the following:
  • The maximum loan amount
  • Rate of interest
  • Facilities
  • Loan processing time
  • Processing and administrative charges
  • Penalties for late payment and prepayment
A lot of people wondering home loan kaise le end up applying with multiple banks. This is a bad idea as it could adversely impact your credit score. Always shortlist maybe 2 banks after thorough research and then fill your application form with the first one. If your application doesn’t get approved, only then apply to the second one.

Choose a Suitable Loan Tenure

A shorter tenure for a home loan can lower the total interest burden to a great extent.However, the monthly burden will increase, as EMIs are higher for loans with a shorter tenure. Instead, you can choose a longer tenure, so that the EMIs become far more affordable. You can take possession of your home and begin using it even if you have not repaid the complete home loan. Thus, you need to decide the tenure of your loan with complete precision so that you don’t overburden yourself with the interest component or with higher EMIs. Whether you are considering a home loan or home renovation loan, the interest rate is the first thing to check. However, all the above points need to be kept in mind to make a good decision for this long-term financial commitment.


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