a home loan It is generally one of the largest value loans for an individual over a long period of time. Therefore, it is important to consider certain factors before finalizing the loan and the various finance options available.

rate of interest And EMI

This major factor determines the affordability of the loan. The interest rate can be fixed or floating. One should evaluate the rates offered by different banks and lenders as even a small difference affects the EMI to a great extent. Also, evaluate how much the EMI can increase if the interest rates on a floating rate loan rise.


loan term

It is advisable to take the maximum available tenure for the loan as it reduces the EMI amount over that tenure. Loans taken in the initial earning years usually offer longer tenures of 25 to 30 years.


charge

bank and finance companies Charge a percentage of the home loan amount as processing fee or a fl on the fee. Sometimes, banks may waive this or offer discounted rates. Another mandatory fee is the stamp duty for a loan agreement. An applicant may also need to take Insurance For home loan. This amount can be added to the monthly EMI or can be a lump sum premium.

documentation

Each bank has its own requirements with respect to the documents required to process the home loan application in the form of income documents, KYC documents and property documents. Contacting a bank that already has a long-term banking relationship can make the process quicker and easier than contacting a new bank.

things to note

• A person’s credit rating affects the loan amount, interest rate and tenure.
• The tax benefit on the interest and principal paid on the home loan should be considered.

Content on this page is courtesy of Center for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.