Important things to consider when going for a home loan

  • Ensure you calculate the total loan payments yourself. You need to know the exact amount you will be paying at the end of your loan term. You also need to know the penalty you will be charged if you prepay the loan. Sometimes, such penalties can be substantial.
  • Loan repayments are tricky to calculate, so make sure you know how the payments are worked out on a compound interest basis.
  • The kind of interest rate you choose is also very important. Are you going in for a fixed rate loan or a floating rate loan? If you are a first time buyer, make sure that, whatever option you choose, your EMI remains fixed even if the interest rate goes up for the first few years of your loan term. This will enable you to plan ahead and feel safe that your payments will not increase like they would with a pure floating rate home loan.
  • Before you go in for a home loan, make sure you have a good credit history. Banks and other financial institutions use credit checks. To have a good credit history, you should pay your credit card bills on time and not change your house address frequently.
  • Try and set aside a solid deposit, say 15 per cent of your property price, so you can make your monthly payments even if you are without a job for a brief period.
  • Ask your lender if they will allow you to make more than your allocated payments. If they agree, you can pay more money whenever possible, so that you pay less interest at the end of your loan tenure.
  • Before applying for a home loan, you should know for sure you have a permanent job to pay your EMIs on time. If you are holding a temporary job and you lose your contract and fail to make payments on time, it may result in the bank taking away your home.
  • Use money wisely and gradually. Don’t expect sales persons from banks to educate you. Do your research thoroughly and then make a decision.
  • Finally, any form of credit does carry its risk. But, if it is managed in a methodical manner, you will be in a comfortable position in the future.
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