You may have different goals that you wish to achieve in life. Some may be long-term goals, while others may come with a short-term horizon. And if you are like most people, buying or building your own home is likely to be one of the top goals that you wish to fulfill over the long run. A home loan can help you make this dream come true.
With affordable interest rates and a high borrowing limit, home loans can make it easier for you to buy an existing house or even build your own dream home. If you are planning to avail a housing loan some time soon, you need to keep in mind that it is a major financial decision.
So, here are 5 things to consider when you avail a home loan.
1. Your credit score
Your credit score plays a key role in determining your home loan eligibility. Typically, banks and financial institutions prefer lending a home loan to applicants with a good credit score. And a good credit score is anything that is 750 or higher. So, check your credit score before you apply for a housing loan. And if it is less than average, work towards building it up before you apply for a home loan.
2. The down payment on the property
You cannot avail a home loan for the entire cost of purchasing or constructing your dream home. A portion of the cost will have to be paid upfront, as a down payment. Depending on your home loan eligibility as well as the policies of the lending financial institution, you can avail a loan to fund around 70% to 90% of the cost. If you have surplus funds in hand, you can pay a larger sum as the down payment and thereby reduce the amount borrowed.
3. The interest rates
This is one of the most important aspects to consider when you are availing a home loan. Typically, the rate of interest can be fixed or floating. A fixed interest rate remains constant over the repayment tenure, while a floating rate of interest changes according to the base rate fixed by the Reserve Bank of India and the general economic conditions. Check with your lender about the kind of rates they charge and compare your options to avail a home loan at the best interest rates possible.
4. The charges associated with the home loan
Apart from the interest rates, there are also other charges associated with a home loan. Processing charges, for instance, are levied upfront for processing your loan application. Then, there are late payment charges for delayed EMIs. Some lenders also levy foreclosure charges or prepayment charges if you wish to repay some or all of your loan ahead of the schedule. Check out the charges associated with your home loan before you apply for it.
5. The repayment tenure
Lastly, the repayment tenure offered by banks and financial institutions tends to vary from one lender to another. Generally, you can choose from a range of tenures, such as between 5 years and 20 years. So, if you are planning on availing a home loan, check out the repayment tenure options available for you, and choose the optimal tenure based on your financial situation. The EMI amount will vary according to the tenure chosen.
Before you go ahead and avail a housing loan, ensure that you do a quick check of the above aspects and consider them before making a decision. This way, you can avail a loan that is optimal and affordable for you. Not factoring in these key aspects can be a costly mistake to make. So, ensure that you run over these things once before you approach a lender to fund the purchase or construction of your dream home.
I am Arjun Kumar. I am the owner and administrator of Finance Gradeup. I have completed my education in Arts & Technology. Arjun Kumar usually has interests in playing games, reading and writing. He was a brilliant student during his college days. He also works for many private companies, but the main interest of Arjun Kumar is digital marketing. He thinks that reading is a must before providing any quality information to his readers. You can find Arjun Kumar on much social media handles online, or you can learn more about him in about us page.