Home loans are an essential part of the home buying decision of an individual. The borrower is charged the minimal interest rates on the home loans compared to any other type of loans like car loans or corporate loans, or else personal loans. The home loans are charged at an interest rate as low as 6% per annum to 9% per annum. The loans can be availed for a maximum tenure of 30 years, depending on the borrower’s age. It is the right of a consumer related to the “Right to information” before applying for the loans. The borrower should read the terms & conditions thoroughly before using them for the home loans. The markets for real estate & home loans are slowly recovering from the second wave of the pandemic. The first wave had a severe impact on the real estate market compared to the second wave. The loans are quickly processed within a week in proper employment, proper documentation, and the good CIBIL score of an individual.
The maximum disbursement for the home loans that can be approved is Rs.3.50 crore, while the actual home loans approved depend on the basic salary of the borrower. Also, in percentage, the maximum loan approved is 80% of the property value. The borrower should opt for lower loans as far as possible in buying property as the lower the amount less is the liability on the borrower towards the repayment. The installments payment is exempted under the income tax act 80C for the borrower to help reduce the burden on the borrower while repaying the loans. The borrower can also avail of the loans on a joint name as it can help the borrower avail higher credit in case of both the people working.
Following are the things to consider while applying for Home Loans
Interest rates charged by the lender:
There are different lenders who charge interest rates differently. And accordingly, only the borrower should avail of the loans as per the lowest interest rates charged by the lender to the borrower. The borrower thus should do a thorough survey of the interest rates being charged by the lenders on the internet.
Terms & conditions set by the bank should be thoroughly checked:
The terms & conditions should be read thoroughly by the applicant before proceeding ahead. The terms & conditions should not be just in favor of the lender. If the conditions are not found to be favorable, then, in that case, the borrower should apply for another lender in case of availing of loans.
Penalties, processing fees & other charges:
The bank charged a processing fee of usually 1% of the property value to the applicant. And a penalty is being charged to the borrower in case of delay or default of loans. Also, the borrower should verify if any other hidden charges are being taken in from the borrower, like CIBIL verification fees, clearance fees, and document verification fees from the borrower.
Background of the lender:
The background of the lender should have thoroughly been verified. The borrower should verify if the lender is a stable lender or not. And also, reviews of the other borrowers should be verified in case of the overall experience of repayment of loans from the other borrowers.
CIBIL score of the applicant while applying for the loans:
The bank expects a CIBIL score of a minimum of 700 points while approving the borrower’s loans. However, slightly lower credits points can lead to higher interest rates being charged by the lender. An extremely poor credit score can lead to the rejection of loans.
Check for the tenure:
The borrower should verify the tenure of the loans in the agreement. There is different tenure validity for different individuals according to their age and income. Thus in case of a higher salary, a higher installment amount & shorter span should be chosen. And in case of lower salary lower installments should be availed.
Check for the monthly installment being applicable:
The actual installment being charged is important to be known to the borrower. The exact figure explains whether the installment payment is affordable or not beyond the routine daily expenses. And accordingly, the only decision to avail loans should be taken according to the suitability.
Payment terms & conditions:
Sometimes the banks charge a penalty on early repayment of loans. These days most of the banks have removed the penalty and, in fact, encourage early repayment by charging lower interest rates to the borrower or providing rebates on early repayment. Also, the due date for the installment payment should be known.
Foreclosure of the loan:
The borrower should know the foreclosure terms if unable to repay the loans on time. The bank should follow only the legal process of acquiring the property in default of loans by the borrower.
Type of interest being charged by the lender:
There are two types of interest rates being charged by the lender, i.e., fixed rates & floating rates.
The fixed interest rates are the ones that are fixed by the borrower during the processing of loans. And the floating is the one in which the interest rates vary according to the market conditions. Thus the borrower should ensure which type of loan he/she is availing.
Thus we can conclude that the borrower should thoroughly check the lender’s background before availing of loans. The loan’s terms & conditions should have thoroughly been checked before availing of the loans. It is a basic right of the customer to “Right to information” before availing of loans