Should I take the Help of House Financing?

Owning a home is a dream for every person but the huge cost involved in it makes it impossible for most people to turn it into reality. Home Loans have however helped in making this dream come true for a number of people. There are however many features of house finance that one must assess and have a complete know-how before applying for it. Some of the major ones are listed below:

1. Interest Rate- All loans come with an additional burden of repayment in the form of interest. One should wisely make a choice of the type of Home Loan interest that they are willing to pay. One can either opt for a floating rate or a fixed rate Home Loan, each having its own pros and cons. The fixed rate is more advantageous in case there is a hike in interest rate as this leads to the continuation of EMI payments at the old lower rate. Floating rate, on the other hand, tends to be beneficial when the interest rates lower down during fluctuation.

2. Loan EMI and Tenure- One may choose to pay a lower EMI for a longer tenure but this attracts a larger sum to be repaid in the form of interest. Banks sometimes try to lure in the borrower to opt for this scheme for more benefits. If the financial conditions permit it is always better to opt for larger EMI for a shorter tenure. In case of a bad credit history, this is a scheme that ensures loan approval. One can easily find Housing Loan EMI calculator online which has made the job of comparison much easier before procurement of loan.

3. Credit History- If the person applying for the loan has a clean credit history that is, he/she does not have any default on any of the previous loans that were taken by them then their eligibility for getting a loan is much higher in the eyes of the bank. Any negative remark on their credit sheet reduces their chances of loan procurement.

4. Extra Charges- Processing fee constitutes about 0.5-1% of the loan amount. Also, other charges like prepayment charges, late payment fee, CERSAI charges, and switching fee may apply. One should go through the terms and conditions of the bank before applying for the loan to make sure that no hidden costs are involved.

5. Proper Documentation- Banks always want a proper document of the property you are planning to buy to make sure it is not disputed and has a clearance from the Government. Also proper documents with detailed personal information of the borrower including date of birth, PAN, Voter ID must be submitted.

Taking a Home Loan is a huge financial liability for the borrower which runs on for many years. Each month the borrower dishes out 40-50% of their income for Home Loan repayment. But if you are unhappy with your existing lender, it is not necessary to continue with the same one. As a borrower, you always have the freedom to switch from your existing home loan lender to a new one and avail better services using the home loan balance transfer. One can easily opt out of their current loan provider and shift to a new one by Home Loan transfer. There can be a number of reasons as to why one would opt for it, the primary reason being the interest rate difference. This is a lucrative option for people who are still subscribed to the home loan offered at the base rate. Also, for people who had opted for fixed interest rate loans and are facing the burn when the rates of other banks are lowered.

Anamika Verma writes various types of tutorial related to finance and has a vast experience as a financial advisor.