Five Steps to your Home Loan

Raising funds for your realty investment is a key task so here’s some sound advice to facilitate the process

The housing finance industry today is on a growth trajectory especially with the various initiatives such as the Smart Cities and Housing for All undertaken by the government. Rising disposable incomes, stable property prices and various fiscal incentives are some of the other factors fuelling the housing finance growth. Further encouragement to home buyers has been the recently softened home loan interest rates. The most crucial step for a consumer while applying for home loan is to choose a trusted housing finance company and also self-appraise his/her financial portfolio/income. Additionally, the consumer should also keep in mind factors like interest rates, repayment period, LTV and loan eligibility criteria.

However, let’s look at 5 important things that one needs to keep in mind while applying for a home loan:

The right home loan

There are various kinds of home loan schemes available in the market. For a first time borrower, the process of understanding and choosing the right home loan can be quite overwhelming. Considering that a home loan is probably the longest financial commitment for most of us, one needs to take his time and read through the fine print carefully before going ahead. Illustratively few options are loan for purchase of ready property, loan for purchase of under-construction property, loan for self-construction, loan for purchase of plot, loan for renovation/ extension on existing property, loan against existing property, etc.

Equated Monthly Installment (EMI)

The main factor that influences home loans from a borrower’s point of view is probably the EMI. Your EMI is the monthly outflow of money that will go towards repaying your loan. As a golden rule never let your EMI exceed 40-45% of your net monthly income. Further there are options of part pre-payment on home loans without any prepayment charges, in case of your income enhancement in the coming years.

The right kind of interest rate

Home loans typically come with two types of interest rates i.e. fixed and floating. A fixed rate of interest (ROI) is when the interest rate on your home loan remains constant for a period of 3-5 years (depends on the scheme offered by a financial institution) and in certain cases throughout the tenure of the loan.

A floating rate of interest is when the interest rate on your home loan varies depending on the movement of cost of funds for the financial institution, the rate actually increases or decreases with the movement in cost of funds.

Fixed ROI will be higher than that of a floating ROI and should be opted with caution keeping in mind your judgment of the interest rate scenario. There are also options available to switch between a fixed and floating ROI anytime during your tenure, but one needs to check on the switching charges that banks may charges.

Charges and penalties

As such there should be no extra charges except for the processing fees, legal verification charges in some cases, stamp duty on the home loan amount and certain switching charges if you were to change your EMI or transfer your loan to another bank or NBFC.

However, there will be a certain penalty if you default on your payment along with an added interest in some cases. One should be aware of all the charges that are being charged by the financial Institution.

There may be some additional cost for releasing your property documents for photocopying purposes if required, during the tenure of the loan. Suggestively you should ask for a schedule of charges from the company for your records.

Legal and technical clearance of the property

Every bank/ NBFC will get a legal and technical clearance of the property that you intend to purchase. This is very important not only from the banks perspective but also from your perspective as an end user who will put in equity to the property and also will be liable for the loan being sought, hence it is important for you to check with the company on such clearance.



Check out Buy Property around Mumbai and Thane by Squarefeet Group

Squarefeet Group

Satyam Building, 2nd Floor, M G Road,
Opposite Navpada Telephone Exchange, Above Punjab National Bank,
Naupada, Thane West - 400601
Maharashtra, India

+(91)-22-25452903, 66543333

info@squarefeetgroup.in