Important Tips To Be Taken Care Of While Getting A Home Loan
Home loans are essential forms of credit, especially considering the colossal property prices today. Reports suggest that the demand for home loans will likely increase from the present 28% to 40% by 2025.
While availing a home loan is simple enough, a consumer must still consider a few pointers before opting for the said debt. Here are a few tips that can help you choose the best loan to build your future home.
CIBIL score and eligibility
Various financial institutions can have various home loan eligibility criteria. Nonetheless, reputed lenders usually refer to two crucial factors while judging borrower’s eligibility,
- FOIR- The fixed obligation to income ratio determines precisely how much of an individual’s income is spent on installments or loan repayments. Your FOIR should not exceed 40%-55% of your monthly earnings. Greater obligations can significantly lower your chances of availing a decent home loan.
- CIBIL score- Your credit history determines the CIBIL score. Timely payments on your credit card bills and other liabilities can help you build a high credit score. Most lenders today look for a score of 750+ before approving home loan applications.
Penalty fees and other charges
Top financial companies charge various costs associated with a home loan. Some standard prices include:
- Loan processing fees.
- Legal verification chargers for documents required for a home loan
- Stamp duty charges.
- Transfer charges if you switch from one financial institution to another.
- Late payment fees.
- Service tax.
- Pre-payment charges.
As a borrower, you must inquire about a comprehensive list of charges associated with the loan. Do not forget to read the terms and conditions on the agreement so that you do not face any financial hurdles while buying your dream home with a loan.
Shorter tenor Vs Lower EMIs
Major lenders offer a home loan repayment tenor that can range up to 20 years. A longer tenor is preferable to some since the monthly installments are significantly lowered. Nonetheless, the total interest payable for the credit increases significantly.
On the other hand, a shorter tenor may increase your monthly repayment burden. Still, you can clear off the debt faster, limiting interest charged considerably. Before opting for such a loan, ensure that you determine the best tenor and EMI range that you are comfortable with. Otherwise, repayment can become too hectic and problematic.
Control your expenses
There are several costs to buying a home and controlling your expenses is crucial for hassle-free loan repayments. When you choose to apply for a housing loan, create a fresh monthly budget. Reduce unnecessary expenses as much as you can. Allot most of the money to essentials, such as utility bills, food, rent and more. This should help you repay your loan without feeling overburdened by the same.
Negotiation
The interest rates for a loan are not set in stone. You can always negotiate with the lender to settle on a favorable term. If you have a high credit score and low FOIR, you can use them as leverage. A clean record presents you as a safe investment for the financial institution allowing you to negotiate for lower interest rates.
Top financial institutions are always on the lookout for such borrowers with a respectable credit history. They provide home loans to such individuals at borrower-friendly terms.
A home loan is considered as a significant financial investment. These steps outline the various monetary features associated with the loan, which should help one repay its debt without any issues.
