Is Taking a Home Loan a Good Idea?
Property investment is always a good idea. It can turn out to be a lucrative opportunity to make sure that your money grows in the future. Property is not just an investment; it can provide a sense of relief and success to people as well. Having a place to call your own is a feeling every person yearns for. No matter the purpose of your aim to buy a house or property, the first thing to consider is the financial state. Your financial state should either be well enough to buy the property or to get a home loan. Various banks and money-lending enterprises provide financial assistance in the form of home loans. These are offered at a controlled rate of interest and can be extended to a tenure of 20-30 years.
The terms of a home loan may sound tempting and trustworthy enough for you to get one, but hurrying through the process may cause you to lose money or make a bad investment. As per the experts, there are certain aspects and home loan repayment tips that you should look over before getting one. Here are some of the points to keep in mind and assess thoroughly to ensure that you make the right choice while signing off the papers.
1. Credit Score
The credit score is a calculation based on the eligibility criteria decided for a home loan. The better you fit the eligibility criteria, the better your chances will be to get a higher credit score. You should ensure that you have a good credit score before you decide to apply for a home loan. You can maintain a high score by paying your credit card bills regularly and by ensuring that you are updated on the timeline of your loan repayment. Having a CIBIL score higher than 750 is considered optimum to sanction a housing loan without any hindrances.
2. Home Loan Options
When you sit down to research the market and the available opportunities for a home loan, you will find that different companies and banks offer different rate of interest, EMIs, repayment tenures, and other factors related to the home loan. Make sure that you go through the terms of each plan and choose the one that suits your financial condition the best. Check out the details required in a home loan application form to further your research.
3. Eligibility Criteria
Is a home loan a good idea? You can answer this question by assessing your eligibility criteria. The criteria do not include just your present financial condition and various other factors such as loans and liabilities that you are currently repaying. Having an active loan can decrease the probability of you getting a loan. Other factors included in the eligibility criteria also include your age, source of income, and co-applicant. Being close to retirement age can decrease your eligibility as the repayment tenure will continue even after retirement.
Also, the age of your co-applicant can be lower than 18, but not much higher than they hit retirement age during the tenure of the loan.
4. Home Loan Tenure
You need to decide upon an achievable and practical repayment tenure for your home loan. Ensure that it is not too short that you have to pay much higher EMIs that you cannot afford. Also, it should not be too long that you undergo a loss by paying a large amount of your principal in interest. The tenure should be so chosen that monthly EMIs are possible for you to meet financially and should end well before your retirement age.
5. Processing Fees
No one wants to spend more money on something that could have been done at a lower price. It is, therefore, better to do proper research before getting a housing loan. One of the home loan tips that most people ignore is assessing the exact processing fees charged by the bank. Most banks charge around 1% of the principal amount of the home loan. However, make sure that you choose a service provider that has the lowest processing fees.
6. Down Payment
This is a factor that cannot be ignored while talking about home loan tips and tricks. You will have to pay 10% to 15% of your principal amount as a down payment. However, if you are financially stable right now and can afford a large amount of cash, then you should choose to pay the highest percentage of the principal amount as a down payment. This will ensure that you will have to pay a lesser interest rate through the years as you cover the rest of the amount through EMIs.
7. Type of Loan
It is a good home loan idea to ensure which type of housing loan is better suited to your present and future needs. In essence, there are two types of home loans offered by most banks and companies. One has a fixed interest rate, and the other has a floating interest rate. A fixed interest rate home loan will be one in which the interest rate does not change with the fluctuations in the market. That means, even if the rate of your property decreases or increases at any point in time, you will have to pay the exact amount of EMI that was decided upon signing the home loan.
A floating interest rate home loan will be the one in which the interest rate keeps changing as the market changes. If the rates of the property reduce over time, you will have to pay a lower EMI. The terms and conditions applicable over both the times of housing loan may differ from one bank to another.
8. Foreclosure Norms
Foreclosure is when you pay the remaining amount of your principal amount before the repayment tenure expires. Paying up the outstanding amount can save you from paying the interest applicable over the amount for the rest of the years of the tenure. However, some banks charge a fine when one chooses to foreclose their home loan. Therefore, it is essential to know the conditions of the bank or the service provider regarding the foreclosure of the loan. Also, keep account of RBI’s norms on the matter.
If you have an impeccable credit score, have a good history of paying your loans on time, and have a clean record, then you can try to negotiate with the bank. It may not amount to a big change in the terms and conditions of the loan, but even a slight decrease in your interest rate can benefit you along the line.
First-time buyer mortgage advice can help you get the best deal when you need financial assistance to buy a property. Among all other home loan ideas, the best one will be to make sure that you read all the documents thoroughly to be completely aware of each clause and rule.
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Q. What should I check before getting a home loan?
Ans. You should go over your eligibility criteria and credit score before getting a home loan.
Q. What factors should I consider before getting a loan?
Ans. You must have a clear picture of your current and future financial needs along with your debt-to-income ratio. Your credit history is another essential factor.
Q. How to choose the right bank for a home loan?
Ans. You should compare different banks offering a home loan and check the interest rate, after-sales services, EMI offered, rate transmission, and incentives offered to borrowers with a good credit score.
Q. What is the minimum salary to get a home loan?
Ans. The minimum salary may depend upon the property for which you are getting the home loan. However, most banks consider the amount of INR 10,000 as the minimum salary to get a home loan.
Q. Can I get a home loan without any deposit?
Ans. It is possible to get a home loan with zero deposit. The option is provided for people who do not have enough savings.