When you decided to buy a house, you first need to check out the location of the property, do the thorough search of the legalities and then arrange money to buy the chosen property.
Due to the increase in the prices of the properties, most of the people do not want to invest their hard earned, lifetime savings and be broke. Here is where a Home Loan comes to their rescue and is helpful in major funding for their purchase of the property.
Home Loan is a loan which is provided by the bank or NBFCs with a long repayment period in Equated Monthly Instalments (EMI) and you need to pay a part or a percentage of the total purchase price of the property as down payment.
At least 90% of the property price is paid by the Lenders, which is given in the form of a loan to the purchaser and is taken from him/her as EMI, over loan repayment tenure extending up to a maximum of 30 years based upon prerequisite eligibility conditions.
Getting a home loan has become easier today, but it is very essential to estimate the amount of EMI you can afford in the long run because defaulting on EMI payment will result in payment of extra interest and subsequent charges, putting a strain on your savings and adversely affecting your CIBIL Score and your creditworthiness.
Consider your income level before purchasing a Home on Loan:
You need to provide your income proof at the time of your loan application, you also have to consider other cash-outs like monthly subscription towards amenities in a housing complex, maintenance charges, etc. These things will not be covered by the loan amount and you will need to pay for such expenses separately.
Timely payment of your Home Loan EMI is very important:
If you pay your EMIs on time, It will reduce your long-term financial burden; helps to maintain a good CIBIL Score. If you maintain a good credit score, you can get any loan in the future easily from all banks and NBFCs.
If you default in the payment of your home loan EMI for a longer period, lenders will seize your mortgaged property and auction to get back the due loan amount. However, before taking such extreme step lenders provide time to the defaulter to repay.
Choose longer Loan Repayment Tenure if you have more years before retirement:
Choosing longer loan repayment tenure will keep your EMI amount low, hence making it easier for you to pay your EMIs on time. It will also allow you to prepay the loan amount if and when you have surplus funds saved from your earnings.
Always provide for a Contingency Fund:
You may face some eventualities like a temporary loss of salary due to loss of job, delay in disbursal of salary, reduction in monthly earnings, etc. Therefore, keep aside some amount of money from your regular monthly earnings so that you can have at least 8 to 9 months’ EMI payment in your pocket at such times.
Pay EMIs through ECS/ Auto Debit from your saving bank account:
Once you fill up and submit the ECS/Auto Debit mandate form to your bank, the EMI amount will be directly debited from your bank account on the pre-decided due date and your loan account being credited, hence there will be a little chance of becoming a defaulter. This also saves you from the problems of going to the bank, writing out cheques, and avoiding the possibility of a cheque being returned due to errors like the wrong amount written on the cheque, wrong payee name or overwriting on the cheque, etc.
Please remember the above important points before applying for a Home Loan.