A
home loan is designed to make the procedure of purchasing a home convenient and
easy. With the assistance of a home loan, you can buy your dream home without
the need to pay the whole amount at once. You can easily fund your home and
repay in monthly EMIs. Moreover, home loans come with lower rates of interest
and simple eligibility parameters.
However,
before you begin your journey with a home loan, whether it is with Shubham
Housing Finance or Piramal Housing Finance or any other
lender, it is important for you to understand all the basics linked with a home
loan. This would assist you in making an informed choice with a clear mind.
Listed here are some of the common terminologies linked with a home loan you
must be aware of before opting for a home loan –
Loan EMIs – This is inarguably
one of the most common and popular terms in the loan vertical. The full form of
EMI is equated monthly instalments. This refers to the amount that you require
paying to the bank lender every month to repay your home loan. You may
calculate your home loan EMI using the online home loan calculator. This
calculator requires you to input details like loan amount, repayment tenure and
interest rate to compute your overall interest outgo and EMI.
Margin – This term means the
down payment, which is a major term of a home loan agreement. Basically, it is
the distinction between the loan proceeds sanctioned by lenders and the actual
property value that is to be bought. In many cases, lenders process up to 80
per cent of the value of the property, and you require paying the rest 20 per
cent in the form of a down payment, also called a margin.
Credit appraisal – Before home loan
application approval, the lender checks the repayment capacity of the borrower
depending on various parameters. These involve your monthly income,
expenditures, age, personal assets and existing liabilities and debts. This
procedure, through which the lender reviews your credibility, is called credit
appraisal.
Loan disbursement – The procedure of
releasing the home loan proceeds by the financial institution to you is called
loan disbursement. A lender basically disburses the home loan just after
getting all the valid required documents from you and checking your
credibility. Loan disbursement can be of 3 kinds – advance disbursement, full
disbursement, and partial disbursement.
Also
Check and Apply: Piramal
Housing Finance
Pre-approved property
– Before the lender approves your request for a home loan, financial
institutions conduct a full-fledged sanity review on your property. Few
builders may get this specific sanity check conducted by lenders in advance to
get the tag of a pre-approved property. By choosing a pre-approved property,
you may get your home loan processed in a hassle-free and quick manner.
Floating and fixed interest rate
– The interest rate is one of the major home loan parameters that you must
factor in before you apply for a home loan with the lender. A fixed interest
rate means that the rate levied on your home loan will stay the same throughout
its repayment tenure. However, in the case of floating-rate home loans, the
interest rate imposed by lenders often changes periodically.
Postdated cheques – Many financial
institutions ask for post-dated EMI cheques before disbursing the home loan
amount to you. As this name suggests, post-dated cheques are those with future
dates mentioned on them. Such cheques may be encashed just on or post the date
stated on the cheque, but not before this.
Resale property – It is an extremely
common term when it comes to a home loan, which is generally used when you are
purchasing a property from any other property owner and not from a builder.
Such kind of properties is called resale properties. Such transactions include
several pieces of paperwork as the seller requires to transfer the ownership of
the property to you.
Foreclosure or loan pre-closure
– Pre-closure or foreclosure loan is the condition wherein you want to close
your home loan account by repaying the whole loan proceeds before the repayment
tenure ends. This is generally done when you have adequate funds in your hand
to repay the loan proceeds. Lenders might charge a very nominal charge called a
foreclosure fee.
Collateral – Collateral is the
asset that you pledge in the form of security for getting the home loan. In the
case you as a borrower fail to make the loan repayment, the lender may use this
asset for the loan proceeds recovery. In the case of home loans, the property
based on which the home loan is approved becomes the security or collateral.
This endows the lender with the right to sell the mortgaged property if you
default on the home loan EMIs.
Quick
tips you must adopt before opting for a home loan.
Purchasing
a home is referred to as one of the best financial decisions that many make in
life. If you are one of those, ensure to follow certain tips for a better
decision. Many are unaware of all formalities that you need to meet to get home
loan approval. If you are opting for your first home loan, you must be aware of
factors like credit score, rate of interest and various other fees linked with
home loan and documentation.
Availing
of a home is once a lifetime decision, and hence you must make it perfectly.
You must be aware of the important home loan components before opting for them.
Here are the common things you must follow before you avail of a home loan.
Credit
score
A
score is a major essential and crucial factor that banks factor in before
offering any approval on loan. So, as an applicant for a home loan, you must
ensure to maintain a strong score of at least 750. Keeping a good score may
make you eligible for a home loan at a lower interest rate.
Rate
of interest
Every
individual must check as well as factor in the home loan rate of different
banks as well as financial institutions. If you want to get a home loan, you
must be aware of distinct lenders to get the lowest interest rate. Before this,
you must be aware of distinct kinds of the rate of interest available in the
market. There are basically 2 kinds of the rate of interest – fixed and
floating. As per fixed home loan rates, EMIs do not differ over the repayment
tenure of home loans. However, as per the floating interest rate, the rate is
computed depending upon the repo rate and changes over time, which may prove to
be advantageous if rates decline in the future.
Ending
note
Now
that you are aware of the different home loan terms and important tips, you are
now better equipped to find the perfect lender for a home loan for yourself.
However, once you zero on the lender, ensure to take the help of an online home
loan calculator to compute the loan EMI as per your preference so that you may
be comfortable repaying over the loan repayment tenure.
