Markets Desk | December 2, 2024
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Home loan is a long-term financial commitment that requires careful consideration. 10 factors every borrower must understand before taking home loan:
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Banks and financial institutions determine your home loan eligibility based on income, age, credit score, and employment stability. Use online calculators to get a rough estimate.
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Interest rates vary between lenders and even a small difference can impact the overall cost of the loan. Fixed rates provide stability, while floating rates may be more economical in a declining interest rate scenario.
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Lenders typically finance up to 75-90% of the property value, requiring the borrower to arrange the remaining amount. Ensure you have sufficient savings for the down payment.
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A high credit score (750 or above) not only increases loan approval chances but also helps secure a lower interest rate.
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Your Equated Monthly Instalment (EMI) should ideally not exceed 40% of your monthly income. Use an EMI calculator to plan your repayment schedule and ensure it aligns with your financial goals.
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Processing fees, legal charges, valuation fees, and insurance premiums add to the cost of borrowing. Review the loan agreement for hidden charges and negotiate waivers wherever possible.
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While longer tenure reduces the monthly EMI burden, it increases the total interest outflow. Strike a balance by choosing a tenure that fits your repayment capacity without overburdening you.
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Thoroughly review the loan agreement to understand prepayment penalties, foreclosure terms, and other clauses. Opt for loans with flexible repayment options to avoid unnecessary charges.
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Government schemes like the Pradhan Mantri Awas Yojana (PMAY) offer interest subsidies to eligible borrowers. Check if you qualify and apply to reduce your loan burden.
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Real estate prices can fluctuate, impacting the resale value of your property. Additionally, interest rate hikes can increase your EMI under a floating rate loan. Ensure you have a contingency plan to manage such risks.
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