Home loan basics: Here's what you need to know
What's the story
While house prices have been skyrocketing, interest rates on home loans are falling. With increasing prices, and with technology like online applications, it's becoming increasingly common to take home loans. However, the loans are granted only after banks check applicants' credit histories to gauge their borrowing potential. In case you're looking to take a home loan, here are some things to keep in mind.
Legality
Checking the legality of the property you intend to buy
Checking the legality of the property you're planning to buy is of significant importance. Banks will generally refuse to give loans if the house's builder is not on its approval list. Therefore, make sure that the builder is reputed and check if all relevant papers are in place. You can also visit the Real Estate Regulatory Authority's (RERA) website to check builders' profiles.
Down payment
Chalking out a budget
This really need not be stated, but it's important to have a budget chalked out in mind. If you're looking to buy a house, you will generally have to pay 20% of the property's value out of your pocket as down payment. Of course, if you can afford, you can choose to pay more than that. Also, check for added fees.
Eligibility
Eligibility criteria for home loans
All home loan lenders have eligibility criteria which have to be met by applicants. Most important among these is your credit history. Other details like income, age, occupation, available collateral security, margin requirements etc. are also important criteria on which home loan lenders decide potential borrowers.
Interest rate
Take a good look at interest rates
In deciding where to take the loan from, interest rates are an important factor. Lower the interest rate, lower your EMI. More importantly however, banks offer fixed and floating interest rates. The former remains fixed throughout the loan duration, while the latter changes with changes in the banks lending practices.
Insurance
Do consider buying insurance cover
Once a home loan has been taken, the burden of the loan will shift to your family in your absence. Therefore, it is always advisable to cover risks through insurance. Buying a mortgage redemption insurance cover while taking a home loan ensures that the cover amount decreases as you pay more and more of the loan.