Having your own
house gives you a strong sense of security; there are no two ways about it.
However, real estate isn't cheap. If anything, it costs more than ever today.
This is why many people have to take a home loan to meet the financial
requirements of a home purchase. However, home
loans have many moving parts, that you must become familiar with before
signing any papers.
Here are some
things you should know before taking a SBI home loan, IBDI home loan, or
any other bank's loan:
Credit Score
If you are going
for a conventional approach, then having a high credit score or CIBIL score
is a must for any kind of home loan.
Almost every bank you will apply the loan at, will check your CIBIL score when
considering the application. Thus, make sure you check your credit score first,
before you start applying. If your score is less than 750, then it is better
than you spend some time to improve
CIBIIL score. Once your score is in
decent shape, you can secure a higher chance of loan approval.
Types of Interest Rates
Not many people
know about this, but there are two types of interest rates, which are- fixed
rate, and floating rate. In a fixed rate, your EMIs remain the same throughout
the tenure of your home loan. However, in a floating rate, your EMIs may change
during the tenure, if the bank changes the interest rate in future. Both types
of rates have their own advantages and
disadvantages:
·
Fixed Rate: This option is secure and
stable. Since your EMI is fixed throughout the tenure, you can manage your
finances easily. However, if your bank reduces the interest rate in future,
then you won't be benefitted from it.
·
Floating Rate: Floating rate is risky, but
it comes with a big advantage. If the bank lowers the interest rate in future,
then your EMIs will also become smaller. The opposite situation brings a risk.
That is, if the interest rate increases, then your EMI's will also become
bigger.
When you apply
for a loan, make sure you ask your bank about the type of interest rate that is
associated with it. Choose your option wise, as both have their own set of
upsides and downsides.
Extra Charges
It is important
to know about the extra charges that may have to pay for taking a home loan.
Depending on your situation, the cumulative charges can be a lot. Some of the
common extra charges include administrative fee, service fee, processing fee,
etc. Some of these could be directly proportional to the loan amount.
Make sure you
get detailed information on the extra charges, and add it to the loan amount,
so that you can make your final decision wisely.
Types of Home Loans
Depending on
your requirements you can take the most suitable form of home loan, for the options
are many. Here are some of the most common types of home loans:
·
Home Construction Loan: In this type of
loan, you have to get an estimate of the home you want to construct, and then
apply for the loan with the same amount. The lender will take the value under
consideration, and approve or reject on the basis of the same.
·
Home Purchase Loan: In this you directly
apply for a pre-constructed home. Since you already have the actual price in
order, you don't have to do a lot of calculations, and merely apply for the
loan at a bank.
·
Home Conversion Loan: If you already
have bought a home through a loan, but now wish to buy a new home, then you can
have the loan transferred to the latter. You don't have to repay the previous
loan this way.
Taking a home
loan is a big responsibility. Thus, you should do all your homework, and do as
much research as possible, before finally zeroing in on one. Also, make sure
you compare all kinds of viable loans, and choose the best one.
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