While buying a house is an exciting prospect, it is also one that requires a lot of planning. Most homebuyers rely on home loans in order to match the property prices. While a home loan is a great way to arrange for the required funds, it is also very important for a borrower to ensure that they have chosen a suitable plan. Not having a proper plan while applying for a home loan can lead to financial problems in the future, and this could end up affecting a borrower’s credit score.
Now, this does not have to be a problem if a homebuyer makes an informed decision while applying for a home loan. To be able to get a good loan plan, all that the borrower needs to do is to keep the following 5 steps in mind:
- Understand your budget
The first step for a borrower is having a clear understanding of the loan amount that they can afford. So, start by calculating all financial responsibilities and existing debt to understand how much is getting spent every month on these obligations. This will help in understanding the budget for a home loan’s monthly instalments.
- Be aware of the processing charges
It is quite usual for financial institutions to charge certain processing fees on a home loan application. This charge can vary from lender to lender, which is why it is important for a borrower to check with their lender about this fee before they apply for a home loan.
- Learn about the lender’s prepayment terms
In some cases, borrowers prefer to prepay their home loans. Do note that the RBI (Reserve Bank of India) has not permitted banks to charge any prepayment fees on home loans with floating interest rates. However, those who have chosen a fixed home loan interest rate might have to incur a prepayment fee.
- Focus on the loan amount that the lender is offering
Most lenders can usually offer up to 75% of the property cost, while some can even go up to covering 90%, depending on the value of the property. Make sure to find a lender that offers a loan amount that is sufficient for the house purchase.
- Keep the interest rate of the loan in mind
One of the most important aspects to focus on is the interest rate of a home loan. This is because a home loan rate can significantly impact the loan’s monthly instalments. Make sure to find a lender that offers a competitive interest rate on the home loan to keep the EMIs affordable.
By keeping these 5 things in mind, a borrower can ensure that they get themselves an affordable home loan plan. Also, it is better to make use of a home loan EMI calculator. This calculator will display the monthly instalments of a home loan beforehand, based on which a borrower can decide whether to go ahead with the loan or look for a better alternative.