Planning to buy a house soon? Here’s the checklist for your housing loan
Buying a home is a dream for most of us. As we start working and earning, the desire to have our own house also grows stronger. In India, the banking system is robust. Banks and financial institutions offer great help to salaried professionals to fulfil their aspiration of owning a home. However, it is prudent to keep a few things in mind (as mentioned below) before you embark on the housing loan journey.
1. What is the real cost? It is important to understand that the cost of the house is not just what you are paying. It also includes costs such as stamp duty, registration etc. Accordingly, it is important to scout for housing loan options and check the maximum loan that you can get.
2. How much EMI can you pay? When the bank gives a housing loan, it gives the option to pay back the amount in easy monthly instalments (EMIs) over a period of time – usually referred to as “tenure”. If the tenure is more, the amount per EMIs will be comparatively lesser but the contribution towards interest on the housing loan will be higher over a period. Usually, the home loan takes away more than 25% of your salary so it is good to first decide the EMI amount you would be comfortable paying every month before option for the housing loan.
3. When would you get possession of the property? If you are not the first owner of the house, then you might get to stay the moment you get the house transferred in your name. If not, please be sure of when you would get the possession of the house. Accordingly and depending on how complete the construction of the house is, you can take only the required amount as loan from the bank and pay interest on only the loan amount already taken by you to avoid unnecessary interest payments.
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4. Have you arranged for the down payment? While banks and financial institutions of today are ready to sanction a huge loan amount for you, they still won’t give you 100% of the value of the house as loan amount. So, before you go for the home loan, you got to be sure that you have the down payment in place so that you can give the initial token amount to block the house for you. Once this is done, it cannot be sold to a different seller as the token amount is given to the seller by you.
5. What’s the rate of interest and type of interest? The rate of interest enables you to compute the total EMI outgo for you. The type of interest could be either fixed or floating. A fixed interest rate would mean that the rate of interest is fixed at a certain percentage for the entire tenure. A floating rate means that the rate of interest would change depending on the policy review by the RBI and corresponding change in lending rates.
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6. Have you checked if there are any additional charges and penalties?: It is important to check if there is a home loan processing fee, charges if you wish to switch the home loan to another bank or financial service institution etc. It is also important to understand the penalty in case you default on an EMI payment. One should also check if there are any additional charges if you wish to pre-pay the loan. Once you are fine with all these conditions, you can opt for the housing loan. If you still have doubts, it is always wise to consult an expert or people in your friend circle who have already taken a housing loan from the same bank or financial institution that you intend to.
7. Have you factored in the insurance on housing loan? : It is very important to factor in housing loan insurance. It is a small additional amount compared to the EMI you pay, but in case of an untoward incident, it will ensure that your family can continue to stay in your house as the insurance would take care of the remaining EMIs.
Once you have factored all these conditions, go to a nice home loan comparison portal and check the best loan options available for you.