Purchasing a house is the most significant step to making life easier. This significant step can be done in a very simple step by taking a home loan. A home or housing loan, often known as a mortgage, is an amount of money obtained by an individual, typically through banks and lending institutions. The borrower is required to pay the loan amount with interest in easy monthly installments (EMIs) over a period monthly that can range from 10 to 30 years depending on the type of loan. If you fail to pay the loan on time, then the lender or bank can use the collateral to recoup the loss.
Things you need to know before transferring your home loan
You have to take care of these things in your mind before transferring your home loan.
The benefits and drawbacks of a home loan:
- Low interest
- It reduces the GST rates on one purchase.
- High repayment tenure
- The risks of taking a loan
Things you need to know before transferring your home loan:
- Rate of interest–Every person should compare and contrast the house loan interest rates offered by various banks and financial organizations. Interest rates are classified into two types: floating and fixed. The EMIs for fixed home loan interest rates do not fluctuate during the life of the loan. However, with a floating rate, the interest rate is computed using the MCLR and fluctuates over time, which is advantageous because interest rates are predicted to decline in the future. You should always choose a floating interest rate over a fixed interest rate since your monthly EMIs would be greater if you chose a fixed rate, even if the fixed rate comes with an appealing deal.
- Terms and conditions–Before applying for a house loan, you should always carefully study the terms and conditions of your bank or financial institution before signing any paperwork relating to your home loan.
- Home Loan Tenure: Your payback period is determined by the amount of time you take to repay the sanctioned loan. Your EMIs and the payback duration are closely connected. While choosing a longer-term may result in lower EMIs, it raises the interest rate imposed, causing you to pay double or triple the loan amount due to high interest. If you have a steady and growing income and wish to keep to a tighter budget, a short repayment period with higher EMIs is the ideal option. To incentivize rapid payback, interest rates on such tenures are significantly lower. Banks can provide appealing interest rates to customers who choose a shorter payback period.
- Processing fees: When a house loan application is accepted, the borrower must pay processing fees to the lender. Generally, banks or financial institutions impose loan processing costs of up to 1% of the home loan amount disbursed. You should look for a bank with minimal or no transaction costs.
- Down payment–In most cases, you must pay a down payment of 10% to 15% of the entire house loan amount when you apply for a home loan. The remainder of the loan amount is transformed into your home loan EMI, which you will be obliged to pay on a monthly basis. If you have extra income, you may be able to raise the down payment, which will save you money on future interest payments.
- Additional charges: Banks and financial institutions may impose extra costs at the time of application in addition to your home loan EMIs. Be careful to negotiate these fees with your bank or financial institution ahead of time.
A mortgage, often known as a house loan or housing loan, is a sum of money borrowed by an individual. The borrower is obligated to repay the loan in monthly installments with interest (EMIs). The amount of time it takes to repay a house loan is known as the payback period (EMI). In addition to your home loan, EMIs, banks and financial institutions may charge you additional fees at the time of application. Keeping this above information in mind, the decision to transfer your home loan will be easier.