It is always suggested to go through all documents carefully before going into any agreement; same thing applies for Home Loan agreement also. So, sign only after you have inquired everything well.
Home Loans are offered by two types of lenders- commercial banks and housing finance companies. Various interest rates are being offered by different lenders with different terms and conditions. In this case you need to contact several lenders and check different bank’s interest list and conditions for Home Loans to get best deal.
Check how much Down Payment it is required to pay, find out all the charges like processing fees, administrative charges and payment charges so that you will be prepared with all. People think that only interest rate and EMI is enough for them but you should be aware of all type of charges and type of interest rate whether it is Floating Interest Rate or Fixed Interest Rate along with tenure of the loan. This all will help you to come out to a decision and sanction your loan on time.
Some important factors which should be kept before you apply for a loan are as follows-
Interest Rates- Most important factor because if you are taking Floating interest rate then as per market condition it goes up and increases EMI and if Fixed interest rate then no any changes in EMI but in that case tenure will be longer as compared to floating interest rate.
Ask your lender that on what reference the interest rate will be calculated because if market goes down interest rates also goes down then interest rate decreases by certain percentage. And in case of increment it increases by certain percentage of rate. So before you apply better to collect all information and ask about indexes which are being followed by banks. Where this index will be published and how will you get to know, these all information should be asked.
Annual Percentage Rate (APR) is expressed as a yearly rate which includes processing charges, interest rates, other charges. So ask your lender about APR because banks are obliged to reveal it on customer’s request.
Reset Clause- This you have to check if your loan is with fixed interest loan because interest rate cannot be fixed throughout the tenure.
Spread/ Mark up- This is checked in case of floating interest rate because it is the margin which is either fixed or variable. As per market ups and down the rate interest in Floating Interest Rate it varies.
Fees- Apart from interest rate there are various charges like processing fee, administrative fee, application fee, late payment, switching from one loan package to another during the tenure, legal fee, change type of interest from fixed to floating interest rate and vice versa, technical inspection fee, pre- payment charges, Document retrieval charges and recurring annual service fee. Every lender supposed to show you brief structure of all type of loan fees. Some of them are negotiable and can be waived also.
Some charges are negotiable so before paying discuss with your bank. In processing fee you can bargain so use some tactic and get it reduced. A few of them includes several charges in one single charge so check them and then proceed for payment. Compare all charges with other banks also before you finally select one bank. While calculating all expenses add stamp duty and registration charges also.
Down Payment/ Margin- Some lenders keep it lower than 20-30% of the home purchase price (sometime even at 5%) but some lenders ask 20-30% price as down payment at the time of loan. Ask your lender to lower the Down Payment and his requirements.
Once you have gathered all information from different banks then proceed for Bank Loan. Compare interest rate, intimation, application charges and which are negotiable, negotiate them. Some banks wave their charges before they finally grant the loan. If you are not familiar with banking or economical term then without getting confuse ask your lender. All Banks are instructed to give detail presentation of all terms and conditions of the Home Loan.
Once you are satisfied with all terms and conditions then take written letter of loan agreement or offer letter from lender. Save one copy with you and after reading and understood by all the instructions then only sign it.
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