Every person works to achieve his dream to buy a house of his own. But that involves extensive spending. That is why it is necessary to apply for a home loan. But a home loan is a financial commitment that takes you years to repay.
This article guides you about what to do or avoid while applying for a home loan.
Plan to Buy the House with the help of a Home Loan
It is better to plan to buy a home for years before buying it. The plan is to save over the years through meticulous planning. Once you have enough to pay as a down payment, you can decide to apply for it.
Here is what you must do:
- Plan your expenditure.
- Set aside sufficient funds for initial expenses to convert the house into a home.
- Maintain your liquidity by setting aside some savings for any contingencies that may arise shortly.
- Offer the rest of your savings as a down payment for your house.
By following the above steps, you will have to borrow less, and this is how that will help you:
- You can borrow a lesser amount which you can pay back faster.
- Lender charge lower interest rates on loans of a low amount, you will save a lot of money.
- Lender process Home loans for lower amounts faster.
The ‘do’ here is to save enough to pay the down payment a reduce borrowing, and the ‘don’t’ is not to depend only on the to cover expenses involving the purchase of your home.
Know if you are eligible for Home Loan
The eligibility varies from one person to another depending on the borrower being a salaried employee, a professional, or self-employed. Take time to conduct extensive research and narrow down on lenders who offer terms that work for you. Here is what you must find out for each lender:
Home Loan Interest Rate
Compare the home loan interest rates of each lender. Lenders offer two kinds of home loan interest rates: fixed and floating. Fixed interest rates remain the same throughout the loan tenure, but if lenders offer floating interest rates, they change depending on the Marginal Cost of Funds based Lending Rate (MCLR).
Keep in mind that a fixed interest rate is not always the best. Floating interest rates may reduce the amount you pay as interest. Don’t rush with your decision, do take time to analyze the two interest rates to decide on the one that is a good home loan interest rate in India.
Home Loan Tenure
Your EMIs depend on the loan tenure. It is tempting to opt for a short tenure loan for two reasons: shorter time or repayment, the total loan costs are lesser.
But it is better to check your affordability before you choose the tenure. Shorter terms will mean high amounts in monthly EMIs. Longer terms will need you to pay smaller amounts in monthly EMIs. But since you pay the interest for a longer term, the loan will cost more.
Don’t wait for someone else to decide what is right for you. Do analyze your financial position and opt for a reasonable loan tenure.
You must decide on the amount to pay as EMIs. Analyze every point discussed in the article to help you decide on a home loan.
Remember, you cannot afford to default in paying EMIs. It will bring down your credit score and make future lending difficult.