Home loan is a great option to help you in getting your new home. But here are the things you should consider before applying for one.
Most banks usually have a set eligibility criteria that your final EMI to be paid monthly is only 40-50% of your take home salary. But this said, as a thumb rule it would be great if the EMI is only maximum 28% of your salary. So that even if a recession happens during your repayment period and your are forced to take a pay cut, things won't turn hard.
2. Loan type
There are two types of Home loans which is currently available, which are Fixed and Floating interest loan.
In the fixed interest, the interest % you pay wouldn't vary but in an Floating interest loan, the % varies based on the market condition. So the later is little risky one since the interest might shoot up during bad market.
3. The agreement
Always check the bank agreement very carefully while choosing loans from private sector banks. Hidden clauses are always tricky, read the agreement completely and check for penalties and other charges mentioned. Also check which all conditions comes under 'Default', because you can be made into a defaulter for many other factor other than not just repaying loan alone.
4. Negotiate the rate
The interest rate is always high for individuals without regular income and businessmen. This is because of the fact that the bank assumes that the loan which is given out is risky but if you are in a private / government sector with a steady income for more than 5 years which is growing steady, than the ball is in your court. Demand the least interest amount that they can possibly issue from their end.
5. Reduce the tenure for loan
The longer the loan the costlier it gets. It's always a best practise to go for a loan with a reduced tenure, though it's tough I would still recommend it. The amount of interest you pay will reduce drastically if you opt to pay it earlier.
If you have any doubts about the home loan. Please feel free to reach out to us. www.legendfoundations.in/contact-us