Don’t Apply for a Home Loan Until You Read These 5 Tips
Buying a house is long known to be a safe and smart investment. Whether the purpose of a home loan is to secure a property investment or turn a house into a home, it is an acceptable avenue that can be considered for obtaining funds. Much thought has to be put in the process of taking a loan and before you think of applying, consider these five factors:
1. Research thoroughly
With the internet at your fingertips, conduct an extensive research on your available options so that you can settle on the right lender for a suitable Equated Monthly Installments(EMIs). All these details are to be considered before, during and after the application so no hidden surprises show as a rude awakening.
2. Rate of Interest (fixed/floating rates)
A fixed rate of interest is when the interest rate stays constant from the time the loan was sanctioned, regardless of any fluctuations in the financial market. On the other hand, a floating interest rate signifies that the interest rate at which the loan was sanctioned will vary as per the market conditions. In today’s financial market, most borrowers prefer a floating rate of interest as it is proved to have more long term benefits as compared to a fixed rate of interest.
3. Repayment tenure
When you opt for any kind of loan, make sure to check whether the bank will allow you to opt for shorter repayment tenure. It is always advisable to opt for a shorter tenure because the more time you take to pay off the loan, the more interest you need to pay.
4. Employment stability and number of dependants
Banks carefully consider applicants with larger number of dependants. The lenders make an assumption that if there are more dependants, the loan repayment capacity of the borrower decreases, as his or her monthly salary will be spent more on dependants. This will result in delayed or missed EMIs. Stable employment and regular income help provide a favorable impression.
5. Balance transferring
Borrowers can switch their current lender with another. Mainly, the shift is made because of the low interest rate offered by another lender. If this is done, a prepayment penalty is levied so this should only be considered if there is a significant change in the interest rate. The additional cost is a processing fee that is paid to the new lender.
Taking all these factors into thought, decide for yourself if a home loan is the right decision for you or not.