Home Loan

Description

A home loan is taken to buy a new home to fulfil your dreams. Further, property investment is an investment in an asset value of which will increase over some time. Several options are available to get a home loan.

A home loan eligibility depends on your monthly income, fixed monthly obligation, current age, retirement age, etc. Banks typically make EMI 40-50% of your monthly income/salary, considering other factors in favour.

Following are the points to be kept in mind before availing home loan

1. Research on loan options: compare various loan options available to you for financial impact like processing fees/upfront fees, rate of interest(floating/fixed), prepayment penalty, tenure etc.
2. Calculate effective interest rates like consider processing fees/upfront fees and Ist instalment due date etc.
3. Decide about fixed and floating interest rates: the fixed interest rate is ix during the loan tenure and is usually higher than floating interest rates. Fixed-rate loans also have a reset clause, which means rates are subject to revision. Banks usually invokes this at a specific time interval or a sharp increase in interest rates. Floating interest rates can be changed during the term or loan – both upside and downside. A floating rate is preferable unless the economy indicates a sharp price increase shortly.
4. Longer tenure means a high cost of the loan at every increase in interest rate. In the initial years, the Interest component is high in the instalment, and you have to pay higher interest on the remaining principal.
5. Check your CIBIL score: Maintain your CIBIL score. A score higher than 750 will help to get better interest rates.
6. Read documents carefully before signing the loan agreement.