How To Choose Home Loans?

How To Choose Home Loans?

Overview

Nowadays it is very easy to get a home loan.  Like other financial products, it is good to know yourself about how home loans work so you should not be shocked by bad surprises.

Here are some tips you should consider before signing up for a home loan form.

Know your eligibility criteria

An easy way to analyze your credit worthiness is to calculate the EMI you owe.  Banks usually control the EMI amount of 40-50% of your salary, which is the base and other payments.  Refunds and benefits are not included in these criteria.  If you have other liabilities like other loans your eligibility will decrease.  Also, some banks consider the number of dependents you have and are sensitive to lending to you if you have multiple dependents.  This reduces your EMI payment ability.

Apart from your financial position, the bank is also interested in what kind of employment you have.  For example, if you have a steady job or a permanent income, you are more likely to get your loan approved compared to a self-employed person with an irregular income.

Check your CIBIL Score

The creditworthiness of the individual is very important when getting a loan.  Credit Information Bureau (India) Ltd (CIBIL), Ratio between 700 and 900 marks.  This score is based on your credit card usage, check bounce, how you use and maintain your bank account, how many times you have applied for credit repayments, credit cards or loans.  If you have a CIBIL score of over 700, you can easily repay your loan.  All lenders check your score with CIBIL whenever you apply for a loan or credit card.  When you apply for a credit or credit card too much time, CIBIL thinks you are borrowing and thus it affects your CIBIL score.

Loan Tenure

This is a determining factor, you have to choose between low EMI and high interest rate and short term, high EMI and low interest rates.  If you need more credit than your EMI control, you should look for a longer tenure.  This allows the bank to lower your EMI and lend more.  The downside is that you spend more on the interest rate, but with an affordable EMI for a month.  You can also reduce the length of your working years by paying in advance.  A future increase in your income can give you a consolidated lump sum, which you can pay in advance before the end of the tenure, because there are no penalties for this now.

Interest Type

Nothing is simplified when choosing a home loan because choosing an interest rate can be very tricky.  There are two types of interest rate (ROI) fixed and floating.  A fixed ROI means that the interest rate will remain stable for the next 5-10 years or throughout your loan period.  Whereas floating ROI means interest rates may vary depending on RBI regulations, government policies or market conditions.  The standard ROI is always higher than the floating ROI.  If you think interest rates are already on the downside you should look at the standard ROI, which can only increase from this point or else you should look at the floating ROI.  You can switch from standard ROI to floating ROI at any time during your working hours.  Check with your bank for changes in fees that may or may not apply to your home loan, but be sure about that.

Charges and Penalties

There should be no additional fees other than some additional fees such as processing fee, legal verification fee, stamp duty for home loan and transfer of EMI fee from one bank to another or NBFC.  If you fail to pay the loan you will be fined and in some cases additional interest will be added.  Make sure you know about all the penalties and fees that will be charged.  Ask your bank in writing for this information and never take their word for it.  You may be charged a fee for copying your property documents or publishing them for any other purpose during the loan period.

Insurance against Loan

This is one of the most important steps you can take to get your mortgage approved.  Get home loan insurance or get insurance equal to or more than the home loan amount.  In the event of any mishap, the family will be allowed to stay home and the remaining loan will be covered by home loan insurance.  There are also insurance policies that pay off debts in the event of disability, job loss or some serious illness or diagnosis.  This cost should be considered at the overall EMI affordable price as it must be paid separately apart from the home loan EMI.

Tax Benefits

It is good to know all the tax benefits and implications you can get when paying off your home loan.  1,50,000 and Rs.  You are entitled to a tax deduction of up to.  1,00,000 in original amount.  If you plan to sell your property within the first 5 years, the tax saved from the payment of interest will be added to your fee from the sale of the property and will be taxed accordingly.  Points to remember.

Do not rush to get a home loan based on one factor.  Obtain quotes from 2 or 3 banks or NBFC and weigh the factors mentioned above.  EMI affordability and interest rates play an important role in today’s system.

Also, there are banks that pay less ROI if the applicant for the loan is a working woman.

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