Reserve Bank of India has recently lowered the repo rate to 5.15% on 4th October 2019 from 5.75%. Considering that this has become the benchmark rate for home loans across the country, the present time can be regarded as ideal to apply for a home loan and possess property. The latter is supported by the inflating prices across the real estate sector that makes it an ideal asset to be liquidated at a suitable time.
Considering that such mortgage loans are long-term financial assistance, the consequences that they fetch are also long-term. It calls for the need to look into a few golden rules before availing a housing advance –
It is vital to plan before opting for a home loan because it is a significant debt that shouldn’t be taken lightly. The best way to prepare is to check the home loan eligibility online and learn possible interest rates and EMIs on the desired amount based on a borrower’s income profile.
Home loan eligibility criteria for salaried individuals may differ from that of business personnel, so the financial planning must be done accordingly.
Clear out previous debt:
Once a borrower clears all his/her past debts, it subsequently improves his/her credit score, and consequently, the profile. This healthy CIBIL score provides a borrower with negotiating authority, which results in availing the loan at a competitive rate of interest for a home loan, the flexibility of tenor, among other added benefits.
Plan the EMI:
Even though it is convenient to avail a home loan that requires a mortgage, it is essential to plan the EMI before borrowers apply for a home loan. An easy way to tackle EMIs is to ensure that your FOIR is well within 50%. This tip will result in hassle-free and convenient repayments.
Go for timely repayment:
Timely repayment of housing advances boosts the CIBIL score, thereby acting upon the creditworthiness of an individual. Though secured loans do not require potential borrowers to hold very high credit scores, holding 750+ CIBIL score ensures convenient availing of consequent advances.
Decide upon the tenor:
When a borrower applies for a home loan, he/she thinks a longer tenor is more beneficial. Nonetheless, opting for a longer tenor is not an ideal decision. It may seem helpful upfront, but it eventually resulted in a more substantial debt than imagined. The easy way to reduce home loan tenor and EMI is to keep the tenor short explicitly. Even though it will make EMIs a little high, but in the long run, it is more beneficial.
Insurance for your loan:
Loan protection insurance policies are a must when the borrower is applying for a large sum. What this term insurance plan mostly does is, it financially covers the borrower’s family against any unforeseen incident and pays off the loan if needed.
Read the agreement:
A standard mistake that most borrowers make when they apply for a home loan is that they don’t read the loan agreement in detail. As a result, they miss out on some finer details and encounter financial challenges when it comes to additional costs involved or the consequences of a missed out EMI. So, it’s crucial to read and understand the agreement fully before signing it.
A thorough comparison of lenders across the market enables borrowers with access to a suitable home loan possible. There are several HFCs and NBFCs that are there in the market, but not all of them hold a reputation for providing conveniently and quickly approved loans.
Home loans are now easy to avail as a result of a lowered repo rate. And, these points mentioned above will give the borrowers an insight into the things they must remember when they apply for a home loan.
Wish to refinance your home loan? Read: Everything You Need to Know About Refinancing Your Housing Loan