Housing and property loans are essential if you are interested in owning a piece of land or property. These are secured loans that individuals can receive from banks and other lending institutions. Before applying for a housing loan, seek advice from a financial mortgage advisor or update yourself with banking news. This will greatly help you in preparing for your loan!
It can be daunting to take out a loan. But there are great benefits as it can provide financial assistance if you are short on cash, do not want to liquidate your savings, or both. The bank will lend you enough money so you can purchase the house or property in real time, then you can pay off the loans with monthly installments over a set number of years.
If you are interested in a house loan, below are the key factors to remember!
#1. Research On Available Loan Options
The best way to start is doing your own research before applying. This should include the important aspects like down payment, equated monthly instalment (EMI), and repayment tenure. Being familiar with these factors will enable you to choose a suitable home loan from a good lender, with a suitable interest rate at that.
#2. Ensure Affordability
Affordability is a big thing to consider because not only should you be able to afford the fixed monthly instalments (EMIs) over that time period, but you should also be able to sustain the lifestyle you want given your cost of living. Consider the overhead expenses for your priorities and hobbies and maintain a good flow of income should any emergencies arise.
#3. Stick To A Budget
While paying off your loan, stick to a monthly budget. Loan instalments should be paid regularly to maintain your credibility and avoid overdue penalties or worse, increased interest rates. Spend with caution and postpone the non-essential purchases or vacation trips. Being careful with money and having a sustainable budget will enable you to pay off your debt as soon as possible.
#4. Choose A Feasible Monthly Instalment
In relation to budget, the monthly instalment should be within your capacity. Different banks and lending institutions offer varied options to suit the different needs and spending capacities of people. The EMI will also depend on the down payment you will make for the housing loan. The bigger the down payment, the more convenient it will be to convert the remaining amount into EMIs. An expert tip is to choose a monthly instalment that is no larger than 45% of your (household’s) total monthly income.
#5. Maintain Your Credit Score
Having a good credit score is essential when applying for any kind of loan. A higher credit score allows you better interest rates on your loan and higher chances of quicker loan processing and disbursal. Aside from these, a good credit score offers other financial benefits and increases your credibility.
#6. Look Into Foreclosure Norms
Most people don’t know that you can foreclose your home for a good price! You can do this by paying the remaining amount before the “due date.” This way, you avoid the added expenses and the interest rate. Paying your loan early also increases your credit score so it is a win-win situation. However, this may not be feasible so only consider this when you have enough finances to do so.
#8. Check Your Eligibility With Each Bank
Each bank or lending institution has their own eligibility criteria for home loans. Check the website or give the closest branch a call so you can know if you are qualified and what documents you will need to present.
#9. Discuss Additional Charges
There may be administrative or service charges that banks will charge you along the way. Make sure to discuss these prior to the application and contract signing. Double check if they are one-time or monthly charges on top of your EMI so you can budget your finances accordingly.
#10. Read All Documents Carefully
Lastly, read the contract/agreement documentation before signing. You should have full knowledge of all terms and conditions before making any final decisions.
These are ten important things to consider before seeking a home loan! When you check these things off your list, getting a loan becomes much easier and smoother.