Understanding Home loans in India

Understanding Home loans in India

28th May 2019

Owning a home is the dream of every person. However, most of us cannot afford to purchase the property outright. One of the better ways to purchase your dream home is by taking a home loan. In order, to be able to avail the best home loans in India, you need to understand the different terms associated with home loans and then prepare accordingly to get the best home loan in India.

Different Terms Associated With Mortgage Loans (Home Loans):

1. A principal is an amount that you borrow from the lenders as a home loan. In India, lenders are allowed to offer up to 90 percent of the property value as home loans. However, lenders do not offer all 90 percent of the property value as a house loan to everyone. It is determined on the basis of your financial standing, your credit history, income, and other such details.

2. The down payment is the amount you contribute along with the house loan to buy the house. Depending on the housing loan amount offered to you, it can be between 10 to 40 percent of the total property value.

3. An EMI or Equated Monthly Instalment is the amount that you need to pay every month to the home loan lender as a part of the process of mortgage loan/ home loan repayment. It consists of the principal and interest components.

4. A home loan interest rate is the interest charged by the lenders on the housing loan. It is higher if the house loan tenure is longer and lower for a short tenure. Lenders determine the home loan interest rate as per the prime lending rates. Interest rates can be floating or fixed. The former fluctuates as per the changes in the market interest rates, while the latter usually remains fixed for the duration of the housing loan.

5. Lenders levy a home loan processing fee as well as other charges like service fees, prepayment charges, etc. The home loan processing fee is charged to check your home loan eligibility. Most of these fees are non-refundable.

Guidelines Regarding A Property And Home Loan In India::

1. Check your credit history and use a home loan EMI calculator to compute your home loan eligibility.

2. Gather all the required documentation like salary slips, bank statements, address proof, DOB identification, etc. and keep them in one place.

3. Compare the mortgage loan rates offered by different lenderss and housing finance companies.

4. Contact the lenders for the best home loan offer or ask them for a pre-approved loan.

5. Lenders levy a home loan processing fee as well as other charges like service fees, prepayment charges, etc. The home loan processing fee is charged to check your home loan eligibility. Most of these fees are non-refundable.

6. Give them all the required documents. Use the pre-approved loan to scout for properties and to negotiate down the price of your dream home.

7. Revert to the lenders with the property details. The lenders will check the legality of the property and other relevant information. After verification, the lenders will disburse the home loan.

8. The first EMI usually needs to be paid a month after a loan disbursement. You may opt for a direct debit or auto debit of the EMIs from your payroll account to avoid missing EMI payments.

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