A home loan makes purchasing a home feasible, but the financial responsibility that comes with borrowing this amount can be immense. This makes it necessary for you to plan for a home loan beforehand and choose elements such as the lender, principal, and tenure wisely. You also need to plan a budget for your EMIs and pave the way for future part-prepayments. Fine-tuning each aspect of your borrowing is key to enjoying a great experience.
To help ensure that you make the most of your loan, here are 5 things to do before you apply for a home loan.
Be prepared to make a down payment
When you apply for a home loan, you should know that you are expected to make a down payment. Lenders will usually finance between 75-90% of the cost of the property and the remainder is your responsibility to cover. Depending on the cost of the property, this amount can be quite significant, and you should be prepared to pay for it from your savings.
Remember, you also have to commence paying EMIs for your loan the following month, while keeping up with your other obligations. So, the down payment may put you in a financially vulnerable position. However, you also want to make as large a down payment as possible. The long-term benefit of this is that you’ll have a cheaper loan to repay.
Decide on a fixed or floating home loan interest rate
As you apply for a home loan, you will need to decide upon the type of home loan interest rate you are comfortable with. Typically, you can choose between a fixed or floating home loan interest rate. With the fixed-rate option, your interest rate stays constant throughout the tenure. This means, you will pay the same EMI without change.
Alternatively, with a floating-rate home loan, the interest rate will fluctuate based on factors like the RBI’s repo rate. With this option, there is potential for profit and loss. If the market is favourable, the interest rate will be low, and so will be your EMIs. On the other hand, unfavourable conditions will lead you to pay more interest. Ultimately, it comes down to your risk appetite and financial capabilities.
Check and meet the lender’s home loan eligibility terms
This is a highly crucial step which you mustn’t skip before you apply for a home loan. Lenders are strict about their home loan eligibility terms and failure to meet these can spell trouble. In fact, an outright rejection of your application is quite possible. This would then reflect in your credit report and can cause problems with future credit applications.
Compare offerings using a home loan calculator
Research is an important part of the application process and you can start by comparing lenders. Use a home loan calculator to compare loans based on the options you have for the interest rate, loan amount, and tenure. The calculator tells you your EMI and total interest payable. Before deciding, however, you should also account for the associated loan charges, such as processing fees.
Plan for repayment well in advance
As a follow-up to the previous step, you should also chalk out a repayment plan. This could involve elements such as:
- Picking the best loan amount and tenure
- Budgeting for your EMIs
- Saving up for part-prepayments
- Identifying sources of additional income
- Closing other forms of debt
Prior planning is a must before you apply for a home loan. The above-mentioned pointers should help you get started in the right direction. With the basics in mind, you can then proceed to better evaluate loans such as the Bajaj Housing Finance Limited Home Loan.
This Home Loan offers finance of up to Rs.3.5 crore at a competitive home loan interest rate. You can repay it over a flexible tenure that ranges up to 30 years. This makes repayment affordable and you can customise it to suit your financial capabilities. What’s more, when you apply for a home loan here, you can qualify for a PMAY subsidy. Moreover, the eligibility criteria are simple, and you don’t have to worry about providing a long list of documents. You only require minimal documentation, and you can avail expert assistance to get that in order. To enjoy these perks and a comfortable loan experience, apply online for this home loan.
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