Taking any loan requires proper planning and in-depth analysis. In
particular, when you take a home loan this becomes even more important because
the commitment is for long term, typically 15 to 20 years. In case you happen
to select the fake a wrong bank or an inappropriate loan product, you may end
up in paying more money for your home loan that you should. Many a times,
borrowers tend to hurry up with their home loan choice and end up committing to
a costly deal that negatively impacts their future finances even though it
looks good initially.
Below are some of the common mistakes by the home loan borrowers:
1. Opting for Teaser Home Loan Schemes: Banks come out with
different home loan schemes to address different segments of the market. One of
the very popular schemes is teaser home loan scheme. Under this scheme, in the
initial years or months, interest rate is fixed as low as 8% to 9% per annum in
order to attract customers. After the initial period, loan shifts to a floating
rate of interest, typically accompanied by a steep increase in the applicable
rate of interest. Those who choose such schemes must check if they have the
ability to afford a higher EMI in future.
2. Borrowing more than you can pay as EMI to the bank: This is
another very popular mistake that many home loan borrowers make. When banks
check the loan eligibility of the borrower, they search each and every
parameter and after that grant the home loan.
However, even borrowers must check whether they can reasonably pay the
EMI while meeting their other commitments.
There should be adequate cushion available for slight increase in
EMI. Further, if the property being bought is still under construction
and the borrower is staying on rent, he must check that he can pay the rent and
pre-EMI at the same time. Further, some parts of the cost of flat (such
as stamp duty, registration, club charges, etc.) are typically not funded by
banks.
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So, borrower must have adequate cushion available to make these payments
to the builder. It is also common for builders to many a times increase
the overall cost on some pretext or the other, so some cushion must be
available to make this extra payment. Try not to maximize your loan
amount eligibility. Opt for a loan tenure that is most comfortable but
not necessarily the longest as you pay more interest to the bank for the same
loan when you opt for longer loan tenure.
3. Not studying home loan agreement properly: As a home loan
borrower, it is very important that you properly read and understand the home
loan agreement before signing on the dotted line. It is a fact that more than
95% of the home loan borrowers don’t read the document properly. The loan
agreement sets out the rights and obligations of the bank and the borrower.
While the document may appear lengthy or complicated, it is important to read
and understand it as you are agreeing to abide by it.
Feel free to ask your bank representative to explain to you any terms
that you don’t understand in the loan agreement. Most importantly, the loan
document will typically have a schedule that will list the applicable interest
rate, charges and other commercial information. Please read this part very
carefully and ensure that the contents are same as what you have been told by
the salesperson.
These are some of the mistakes that are often made by home loan
applicant. Still, you need further suggestion about home loan in Mumbai, Bangalore or any
other metro city in India, contact MyLoanCare sales team.
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