People mostly take a home loan when he/she want to buy a new house, renovate or repair the existing home or want to buy a plot of land for the construction of the new house. The property is mortgaged to the lender as a form of security until the full repayment of the loan is done. The title of the property is held by the bank or the financial institution till the loan has been paid back with due interest on it.
As we know that nowadays the rates of properties are up on a hike and buying a house is very expensive and a huge investment. One way of doing this is by taking a home loan.
But taking a home loan means paying 55-60%of your monthly income as EMI (equated monthly income) for a long period. Hence it is important to make a decision that won’t hurt you in the future.
Various steps are involved while taking a home loan:-
- Step 1. Approximate your Home Loan EMI
Check your Home Loan Eligibility, Decide the amount of loan, and the time.
- The first step is to find the amount of EMI you can pay comfortably, considering all the other expenses. you can check your home loan eligibility on the DHFL Home Loan website
- Calculate your loan eligibility for various loan tenures based upon your EMI and age. opt for the shortest tenure possible. Disclose your sources of income, as it can improve your chances of eligibility
- Step 2. Check approval status of your property :
Check all the documents of the property properly from the first owner to the last owner of it. The approved map plan should also be available for the self-constructed property.
- Step 3. Floating or fixed home loan rate
The next step is to know whether you need to go with a fixed-rate or floating rate. floating-rate loans come with nil prepayment charges whereas Fixed rate loans may be advised when your monthly expenses won’t take any additional burden/ unpredictable increases on account of interest rate rises.
- Step 4. Home Loan prepayment and foreclosure charges
While the home loan is sanctioned for tenure as long as up to 30 years, most people pay off their home mortgage in around 8-10 years. This is because most people pay off partial or full payment of their loans when they have a surplus amount of money.
Therefore it is important to select a bank that allows you to prepay your loans without any charges. as per RBI, prepayment penalty charges are not allowed on floating rate home loans. Whereas banks do charge a prepayment penalty charge on fixed-rate loans which can vary from 1%-3%.
- Step 5: Selecting the best bank is very important
The selection of a bank should not only be based upon the rate of interest but also various other factors like the Turnaround time and customer service levels. Check the previous base rate trend of the banks you are considering. This will help to let you know the frequency at which the bank rates change. Compare offers and choose the best one and not necessarily the cheapest.
Also read:- Tips that will help you close your home loan early
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