Common Mistakes To Avoid While Taking A Home Loan
Buying a dream home isn’t easy. And considering a home loan is even tougher!
Borrowing a home loan requires careful planning and analysis. Sometimes, you need to spend months and months to
get everything streamlined. You should do some preparation and background work to avoid hassles in your home loan process. Here we are discussing some common mistakes one should avoid while
taking a home loan.
Choosing your property first? Choose it alongside a lender.
Imagine you find your dream house and then discover that the lender that you had chosen will not fund that property due to some legal or document issues. Won’t that break your heart? Most of the
banks (lenders) provide loan for ready-to- move-in property and even for under-construction properties with renowned and approved builders and projects. But if the property is unapproved or
unauthorised or if there are legal issues, chances are the bank will reject your application and refuse to give loan.
Also, if the property is very old or it is developed by a relatively unknown builder, the bank might have an issue with providing a property loan. The best way is to select your property and
then simultaneously find out if any other lender has funded for another flat in the same building.
That lender should anyway be a part of your consideration set. Also if you approach lenders alongside, you are likely to get better rates as lenders reserve their best rates for immediate disbursement cases.
You can also approach a property agent to help you in finding the lender.
Another thing to consider here is to not consider the bank where you have an active account as a first preference. It may sound as a convenient option, it may not necessarily be the best option.
Always approach multiple lenders to see who is offering you the best interest rates and other services. Remember that even a difference of few decimals points in interest rates can help you save a lot over the loan tenure.
Confused between fixed or floating? Choose according to your requirement.
Now as you choose your lender, remember you can avail a loan either on fixed rate of interest or floating rate of interest.
Fixed rate of interest remain unchanged irrespective of the changes in the rate of interest in future years.
Whereas floating rate of interest suggests that rate of interest will
change if the RBI will make changes in the interest rates. How to zero down on one? Here’s the formula.
If you are taking the loan for a shorter duration (5-7 years), choose a fixed rate of interest.
But if you are going to repay the loan in say 20 years or more then you should take a loan on floating rate of interest as you can’t predict the changes for such a long duration.
Borrowing more than you can afford? Not a good idea!
Don’t make the mistake of borrowing more that what your income level permits. While determining your loan eligibility, banks would most definitely consider your income and liabilities but they may
not consider your existing expenses. You need to consider that. It is always better to consider your budget according to your current income and expense levels. If your existing expenses are high and you take a loan which results in high EMI payment, you may end up in a financial crunch. Yes, you read that right. Now, we don’t want to make you all nervous here.
Just do a simple calculation of all your fixed monthly expenses. And add this to the amount of EMI on your proposed home loan.
If the total expenses are way too close to your monthly income levels, you should settle for a less expensive property.
Not planning to read the loan agreement? You may end up signing for something you didn’twanted
It’s lengthy, it’s going to take time. Yes. But make sure you invest that time and effort. After all you are signing up for your dream home! Almost 80 per cent of home loan borrowers do not take the
pain of reading every clause in the agreement.
This can have serious repercussions, if the bank official fails to mention something that may be critical for you when discussing the terms orally.
Don’t fall into that category. Spend some extra time in reading every aspect. Also, it is always advisable to clarify all doubts before you sign the agreement.
Not taking insurance cover for the home loan? You are putting your family in trouble
Your home is for you and your family. But I am sure you don’t want to put the burden of home loan to your family in case something unfortunate happens to you during the tenure of the loan.
So, it’s most important to take an insurance cover or a life cover on home loan that includes coverage of your home and other liabilities.
The cover will provide monetary benefit to your family in case of an
unfortunate incident and ensure that your family members inherit your home not your home loan.
You should also consider taking a personal accident or critical illness cover. In case, your income gets interrupted due to any critical illness (Cancer, Stroke, Heart Attack, Major organ transplant, etc.), the policy will take care of your home loan liability.
For any assistance or an appointment with financial expert, feel free to get in touch with our team on firstname.lastname@example.org