Home loan seekers face an abundance of misinformation that leads them to taking wrong decisions. Since home loans have the highest repayment amount and tenure, any hasty decision can get you into trouble. Credible and researched information is what you need instead of hearsay. If you are looking for a home loan, then a few tips that we have compiled in this article may come handy to you. These home loan tips will not only help you in planning your loan but also get you the best interest rates.
Consolidate high debt loans
Personal loans, credit cards, vehicle loans, etc. come with higher interest rates than home loans. Consolidating all your high interest debts makes the payment simpler and reduces the monthly repayment installments due to a longer pay off period. Once all your loans are consolidated, you will have more clarity into your financial status. Debt consolidation also gives a boost to your credit score which is an important criteria for getting the home loan approved. Moreover, you will feel less stressed once you have consolidated all your loans at one place.
Compare effective home loan rate
Banks charge a premium, margin or spread while giving home loans. This amount or percentage varies based on factors like loan amount, credit score, down payment amount, etc. Salaried customers get home loans at a cheaper rate than self-employed customers. Banks sometimes add hidden charges like processing fee, administrative fee, legal fee, etc. to the loan amount. Thus, you must check with a few home loan providers and compare the effective home loan rate offered by them. Your ideal pick should be the one that offers the lowest interest rate and zero hidden charges based on your customer profile.
Split your risk
The home loan interest rates fluctuate depending on the market scenario. If your home loan is on a variable rate, then an increase in the rate can cause your EMIs to shoot up. A split rate home loan will allow you to split your home loan into portions and repay one part at a fixed rate. So, if the rates go up, the repayment amount for the fixed portion won’t change. This will help you to reap benefits of both fixed and variable interest choices. You also get the flexibility to connect an offset account to the variable portion of the loan. The split needn’t be an equal 50:50 divide. You can define the split ratio based on your financial stability.
Pre EMI and Interim security
If you are taking a home loan for an under construction property, you will be paying pre-EMI for the disbursed amount. Pre-EMI is payable till the construction is not over. There is a chance that pre-EMI can shoot beyond the EMI amount. This would be the unforeseen expense that you haven’t planned for. If the project is delayed, then you will still be paying pre-EMI without any decrease in the principal amount. Thus, it is advisable to take a tranche EMI loan option wherein you start paying the principal as well with the first loan disbursement. Some banks seek interim security for home loans. In such a case, you would be needing money to register the property in your name. Check these points before finalizing the bank or taking a home loan.
Keep a prepay plan ready
Home loan tenures generally range from 15 to 20 years. The interest becomes a substantial portion of the loan amount. Thus, it is better to start building a plan to prepay the home loan as early as you can. You can start saving and plan to repay a portion of the loan every quarter or every 6 months. The interest amount is high in the initial years of the loan installments, hence you should plan to pay more in the beginning years. Certain banks run home loan schemes wherein the amount in savings bank account is counted for credit in the linked home loan account. Such loan payment schemes help in reducing the overall interest burden. You can try taking home loan schemes that offer such repayment benefits.
A lot of companies offer home loan services wherein you get credible information. Reach out to them to do thorough research before making any decision or you can visit websites like ADS.Finance which helps you connect with home loan companies. No matter what bank you choose to take your home loan, always aim to pay a higher down-payment, and negotiate for the lowest interest rates.
