Buying a home is one of the biggest moments in the lives of many of us! But along with the pride and joy, we often feel that small anxiety of loan repayment. Opting for a home loan reduces the burden of paying an entire amount in one go and also helps in saving tax. Here are some points you should consider before buying a house and applying for a home loan:
Choosing the lender:
Your lender plays a very important role in the entire loan-taking experience. Do a detailed research on at least 4-5 banks or financing companies and choose the one that works best for you. Things to consider would be interest rates, customer service, terms and conditions, flexibility to alter EMI amount in future, etc.
Knowing you loan eligibility:
A bank considers your income, your credit card dues and your past record of repaying loans before sanctioning the loan amount. Before taking the loan, consider all aspects and then decide on the amount that you can spare every month for the EMI.
Tenure of loan:
The EMI calculated depends on the amount of loan, interest rate and tenure. The longer the tenure, shorter the EMI but more the total interest that you would be paying. Weigh all your alternatives before finalizing the tenure of your loan.
Avoid unpleasant surprises by getting complete information about the extra charges that you will have to pay to take a home loan. If you don’t consider these costs beforehand, it might make budgeting difficult. Some of the fees and charges associated with home loans are:
- Application fee
- Ongoing fee
- Additional repayment fee
- Late payment fee
- Break costs and exit fees
- Mortgage discharge fee
- Redraw fee
- Re-fix fee
- Switching fee
- Portability fee
- Stamp Duty
Type of interest rate:
Fixed rate – In this, you have fixed interest rate for the entire tenure. Fixing your interest rate allows you to plan more accurately but if interest rates decline, you will miss out on the savings. Fixed rates are also usually higher than variable rates.
Variable rate – Variable rates are good if the rate is likely to decrease, as so will your repayments. Variable interest rates are generally lower than fixed rates. But if interest rates rise, so will your repayments.
Low Doc – If you own a business or have just started a new job, a low documentation home loan can be a good option. Usually with this type of loan the interest rate is higher than regular home loans.
Introductory Rate Schemes – This type of loan offers a lower interest rate in the beginning for a specific amount of time. It is targeted at first home buyers who will find it easier to start off by paying a smaller EMI. But after the introductory period ends, the interest rate usually increases to a number higher than the usual. You could therefore end up paying a lot more in the long run.
Do a proper research on all the options before finalizing on any.
Read the document of agreement
Though very basic, many of us skip this tedious (and usually boring) process. But it is important that you read the complete document of loan agreement before signing, to be sure that all the terms and conditions are the same as what you agreed upon.
Home loan is not a one-time task but it’s a process that goes on for years. Spending a little time in the beginning on research is always a better option than repenting later. Opt for what works the best for you, we at Eminence homes and spaces wish you a happy home buying experience!