Your lifelong dream of buying a home is a life-changing decision for you and your family. It not only impacts your personal growth but also affects your finances. Loan-funded purchases are more suitable for the average home buyer. Before making this huge financial decision, you can consider the following important points regarding eligibility, extra expenses and other technical issues about home loans.
Types of Home Loans – There are essentially 3 types; Floating interest rates (where the EMI will keep changing according to the lender, fixed rate (where the rate of interest is fixed throughout the tenure) and lastly combination of the above two. You need to check the credentials of your lender/bank and the history of their interest rates to decide whichever suits your needs the best.
Eligibility – There are certain criteria which most of the banks will check before sanctioning any loan. Your CIBIL score, credit history, income, profession, assets, previous and existing loans, a family are some points which the bank will study before they approve. All these factors will also affect the amount of loan that you may receive.
Pre-EMI – EMI or Equated Monthly Instalment is the amount of money you pay every month against the loan for a fixed tenure. The concept of pre-EMI is recently introduced for those properties which are under construction.
Hidden expenses – Many people do not know about some expenses which accompany the loan. These include processing fees, administrative charges, technical evaluation charges, stamp duty on the loan agreement, franking fee, memorandum for Title charges, documentation charges, indemnity cost, home loan insurance, notary fees and defaulter fees. It is important to carefully study the loan documents and every bank’s policy and compare these rates before making a decision.
Document check-list – There are 3 main group of documents to disclose. The KYC or know your customer is your basic identity proofs like PAN card, Aadhar card, address proof and recent photographs. Income documents will include bank statements, salary slips, IT filing and return forms and employment certificates. Last but important set of documents are the prospective property documents. These include everything you acquire at the time of finalizing the home like a sale, title and mother deed, registration and stamp duty, NOCs, Sale agreement, commencement and completion certificate, occupancy certificate, society registration and other such documents.
Default – Although it is good to repay your loans periodically, sometimes it becomes difficult to pay for some people. Here is important to bear in mind that according to Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), a lender can take legal action against the borrower if he fails to pay the instalment for 3 consecutive months
Although buying a home can be an emotional decision for many, but it is advisable to first check the amount of loan that you can receive before zeroing in on the property that you want to buy.
Home loans and property purchases come along with a lot of misconceptions. It is important to study and understand the truth behind these before making a decision.