The India has a growing real estate sector. The flourishing economy of the country is providing ample opportunities for a new generation of home buyers who are looking for affordable residential properties. The sector has witnessed a growth of 19% in the fiscal year 2018-19.
Growing affordability of the properties, various schemes from the government and easy availability of Housing Loans are the main reasons behind the growth of this sector.
Home or housing loan is a type of credit offered by financial institutions to fund the expenses of buying or renovating a house. It can also be used to buy a plot to build a property.
Here is a list of 7 things you must know before taking a Home loan.
Choose the Ideal Loan Amount
Choosing the perfect loan amount is very crucial for a borrower. Financial institutions usually offer a higher amount in case of Housing Loans as it is a secured form of credit. However, borrowers should not avail an amount more than they can repay. A higher loan amount will increase the financial burden on a borrower, and it can even lead to defaulting.
Compare the Housing Loan Rates of Interest
Financial institutions take into account various factors determining the interest rate for a home loan. Borrowers should shop look for lenders who offer the best interest rates and other beneficial features with their home loans. Also, they should keep an eye on the current lending rate and future ones as per market fluctuations to profitably choose between fixed and floating interest rates.
Determine the Ideal Tenor
The tenor of a loan can significantly affect the total cost of a loan. A longer tenor reduces the EMI amount but considerably increases the interesting part associated with a loan. On the other hand, a shorter tenor comes with a higher EMI amount, but the total amount payable is significantly less.
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Borrowers can use an online EMI calculator to help them determine the ideal tenor according to the monthly payment amount.
Part Prepayment Can Reduce the Interest Amount
Borrowers can avail the part-prepayment facility to reduce the interest amount on their housing loan. A borrower can pay off a part of the principal amount when they have surplus funds. It ensures that a borrower will only have to pay interest for the remaining principal amount and thus reducing the total interest associated with a housing loan. A borrower can make a part prepayment when they pay an amount higher than the EMI.
Opt for Foreclosure Wisely
Borrowers can avail foreclosure facilities to repay the debt before the end of the tenor. Repaying the entire principal amount will help to avoid the interest of the principal repaid. However, borrowers must check that the amount of interest saved should be higher than the foreclosure charges levied by the lender.
Avail a Balance Transfer Facility If Required
A balance transfer is a procedure of shifting an existing loan to another financial institution that offers a lower interest rate. This facility can considerably reduce the total interest amount due to a lesser interest rate.
Now that you know the crucial things to know about home loans, you can carry on with the home loan online application procedure to avail the required funds. Also, make sure that you are aware of the factors that can affect your housing loan eligibility before you apply to eliminate any chances of rejection of your application.
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