Outlook Money
Home loans are one of the biggest loans people take out over an extended period, and it signifies a major financial commitment but before taking out a loan, one must understand all factors properly.
1. Tenure of Home loan; Longer tenures of loans produce lower EMIs but higher overall interest payments whereas shorter tenures produce higher EMIs but lower total interest expenses. One must decide this based on the financial stability.
Interest rates influence how people take loans. Rates can be fixed, keeping constant throughout the loan term for stability, varying with market circumstances and potentially advantageous or unfavourable depending on changes. For this, one, must compare all the rates.
Ensuring all documents are ready make the loan application process smooth. These often contain proof of income, bank statements, property paperwork and other pertinent documentation etc.
While taking a loan, banks usually charge a processing fee, which is either as a percentage or flat fee, and can be waived off sometimes too. There is also stamp duty on the loan agreement and probable insurance expenses, which can be added to the EMI or paid beforehand.
Credit score plays an important role for loan eligibility and the interest rate given. A higher credit score can lead to more favourable conditions and cheaper interest rates.
Down payment is often asked by lenders on property's value, which can be 10% to 20% . The amount one can afford as a down payment impacts the loan amount needed and consequently, EMI. A higher down payment reduces the loan burden and can lead to better interest rates.
Compiled by Syed Muskan