The increased demand in the arena of home loans is elevating with every passing year. The study says that there is a palpable interest among Indians to go for home loans, which are simultaneously connected with rising income. It is important to have a well-informed mind before opting for a home loan. If applying for the first time it is no cakewalk. Here are five important points, one needs to consider before signing up for it.
Eligibility - The criteria primarily talks about the age limit, which stretches from 24 to 65 years when the person is a self-employed individual. In the case of a salaried employee, it drops down to 60 years. However, the entire process will not be taking place unless the applicant has covered two years of working experience. Your financial status must be flexibly sustainable as home loan depends on your net income.
Rate of Interest - The interest rate varies from one bank to another. It is indispensable to check and compare the rates before settling for one. There are two distinctive interest rates, floating and fixed. Under fixed interest rate the process entirely remains unharmed by the market fluctuations and one has to repay the loan in fixed installments throughout the loan term. Hence when the interest rate decreases one cannot take advantage of it. The floating interest rate changes based on market and rate fluctuations by the Reserve Bank of India. While a floating interest rate may get cheaper than fixed interest rate and the monthly EMIs will be in a standard structure, in an event where the RBI chooses to hike its lending rate the same will reflect on your monthly EMI too.
Understanding the tenure - Home loan tenure is an important factor upon which the EMIs depend on a greater scale. Often people are unaware of the difference between long-term tenure and the short term. When you have a short tenure your installments might increase but at the end of the day, your cost of loan will be cheaper. In the case of long-term tenures, you will be paying a larger amount, often more than the principal amount. While your EMI will be cheaper.
Credit antiquity - The credit score plays a vital role in home loan applicants. The banks introduce themselves to your credit history followed by the credit score when you apply for a home loan. Based on the trail of your credit history, the bank decides whether to continue with the application or dismiss it. It varies from 350 to 900 where 900 is always preferred.
Terms and conditions - It is highly predominant to keep your eyes open while going through the column of terms and conditions. Reading and understanding each and every line before signing the documents fall under an obligatory habit. It is advisable to always keep track of the stated terms and conditions, to avoid hassles.