INTRODUCTION:
Buying a home is a big step, and taking a home loan is often the first move in that journey. Home loans are often marketed with low interest rates and even though they grab your attention, there’s a lot more to consider before signing the papers. From hidden charges to choosing the right insurance, being aware of these small details can save you a lot of money and stress later. This guide will help you understand the five most important things to check before applying for a home loan.
- Low interest home loan offers come with a hidden cost: Selecting a home loan just because of its low interest rates is not a good idea. There are many hidden costs charged by the lender to compensate for the lower interest rates. This significantly increases your overall costs of borrowing. Apart from the processing fees, you also have to pay stamp duty and registration charges when you take a home loan. These extra charges are not deducted from the loan amount, so you have to pay out of your own pockets.
- Pre-approve your loan before searching for your home: When your home loan application is approved, you can fix your budget and look for a home accordingly. You also have room for negotiation and better deals after you get the home loan approval from your bank. You can even ask the lender for properties in the nearby areas as oftentimes lenders have a good portfolio of home properties. This reduces the need for property documents that you need to submit to the lender and assures you of quality homes.
- There should be no prepayment penalty: Ideally, there should be an option to repay your home loan earlier. (However, many banks charge prepayment charges nowadays to compensate for the reinvestment risk they face because of lump sum repayment of their loan.) Banks cannot charge prepayment penalty on floating-rate home loans. However, this same rule does not apply to fixed-rate home loans. This prepayment penalty may increase your home loan cost significantly.
- Your lender may increase the interest rate if your credit score decreases during the loan period: The Reserve Bank of India (RBI) asked banks to link the interest rates of floating rate loans to an external benchmark, like the repo rate. After this rule, many banks also started linking the borrower’s credit score to the interest rate they offer. This means that if you have a good credit score, you may get a lower interest rate. But if your credit score is low, the bank may charge you a higher rate.
- It is not mandatory to buy home insurance bundled with your home loan:. Many banks may suggest or promote home insurance at the time of giving you the loan. However, you have the right to decide whether you want to buy it or not. It is important to have life insurance when you take a home loan. This helps protect your family from financial problems if something happens to you during the loan tenure. However, you don’t have to buy the expensive insurance the bank offers with the loan.
CONCLUSION:
If you are someone who is looking to buy a home soon, you can book a consultation session from Swift consultancy. We can help you find the right home loan which is tailored to your needs. For further queries you can call us at +91 7666947776 or email us at [email protected]
You can checkout all our services at https://swiftt.in/