Home Loan Options - Points To Know When Comparing The Options

Most individuals fulfil the dream of owning their home with the help of a home loan. However, a home loan is a long-term commitment that will run for many years. Therefore, before comparing the various choices and availing from the home loan options, it is crucial to consider a few critical points.

1. Eligibility Criteria The primary point to consider before availing a home loan is to assess the eligibility criteria . Although comparing home loan options help in understanding the requirements, the primary considerations include income and repayment capacity apart from job stability, years of experience, number of dependents, and others.
2. Types of Home Loans There are three types of home loans - adjustable/floating rate loans, fixed-rate loans and combination loans. The type of home loan affects the cost of availing the loan.
3. Home First or Loan First It is ideal to compare home loan options before selecting a house. This way will help in fixing your budget and make your house search more focused.
4. Loan Amount Banks provide a loan between 75 - 80 per cent of the value of the property. The balance is expected to be paid by the borrower. Hence, one must arrange the balance payment before comparing home loan options.
5. Insurance Cover Another vital point to consider is to purchase a good insurance plan that covers the loan amount. In certain cases, banks insist borrowers opt for insurance while availing a loan.
6. Cost of your Home Loan Another essential point to consider when comparing home loan options is the cost of your home loan. Assess all the additional charges and fees and make sure there are no hidden costs.
7. EMI/Pre-EMI In certain cases, pre-EMI is an option where only the interest part is to be part of the amount disbursed. If one wishes to pay the principal, you should tranche the loan and start repaying EMI for the total loan amount.
8. Documentation To avail loan from any lender, it is compulsory to submit kyc documents, income statements, and property documents to the lender. Easy retrieval of the documents should also be kept in mind.
9. Default If the borrower fails to make more than 3 instalments, lenders have the power to take action against the borrower directly.
10. Tenure Different home loan options offer different tenures. The longer the tenure, the smaller the EMI’s and the higher the interest cost.

Although purchasing a house through a home loan is best, do not forget these points when making the decision.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.