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5 Crucial Points to Consider Before Taking a Home Mortgage

5 Crucial Points to Consider Before Taking a Home Mortgage
Owning a house is a dream cherished by many in India. But buying a home is not as easy as finding one. You need to make a significant investment. Most people prefer to take a home mortgage to finance their purchase. However, with many financing options available in the market, finding the right one can be difficult. Therefore, you need to take a few factors into account to obtain the most appropriate home mortgage. By doing so, you can save both your time and money.

Here are the five critical points which will help you choose the right mortgage loan-
  1. Tenure:
The tenure of the mortgage loan will determine the amount of interest you will pay during the loan duration. Going for a shorter tenure will increase the monthly instalments but reduce the interest you pay. Therefore, choosing a loan that gives you greater flexibility with your tenure is crucial. A mortgage loan tenure usually lasts for 15-20 years, so you need to do your due diligence properly before settling down on a lender.
  1. Interest rate:
Even a small difference in interest rate will massively increase your expenses in the long term. So, it is paramount to understand the rate of interest of mortgage loan before finalizing your lender. Financial institutions usually offer floating-rate home loans and fixed-rate home loans.
In the case of a fixed-rate loan, the interest rate is fixed for the entire term of the loan or a certain part of the tenure. If a lender is offering a fixed rate of interest only for a certain part of the tenure, you need to find out whether the rate will be raised after the period. Negotiate the details and come up with a solution that best suits your needs. When the interest rate is fixed for the entire duration of the loan, the EMI amount you have to pay is known in advance. This helps in planning the cash outflow precisely. Moreover, in a rising interest rate scenario, a fixed-rate loan is an attractive option, but when the rates are plummeting, you will not reap the benefits of the lower instalments.
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ALSO READ: Quick Guide to Mortgage Loans - Link

Ideally, you should go for a floating-rate loan, only when you are well-versed with the real estate sector and understand the interest rate fluctuations.
  1. Down payment: Usually, lenders do not sanction the full loan amount. Some financial institutions require 20-30% of the home’s purchase price as a down payment. However, many lenders have a lower requirement of as little as 5%. The mortgage loan eligibility will depend on your ability to put down a certain amount of down payment.
     
  2. Processing and prepayment charge:
After finalizing your mortgage loan rate of interest and the down payment amount, ask your lender to mention all the costs associated with your loan.
There are several processing fees and loan prepayment charges that you may not know. If you ask for a waiver on a few of these charges, your lender may oblige your request, saving you several thousands of rupees. Finally, once you are satisfied with the terms, obtain a written offer letter from your lender. Read it carefully before signing the dotted line, and keep a copy for yourself.
 
  1. Loan processing time: The turnaround time for loan processing should be minimum. The timeline of the application process should be available on the lender’s website and the updates should be sent regularly to the customers. This will keep them in sync with the status of the loan application.
     
ALSO READ: Understanding The Post-Lockdown Mortgage Industry Before Buying A Home

Conclusion
As a first-time borrower, you may find it difficult to sort through the different financing options. But by carefully considering the above-mentioned points, you can find the home mortgage loan that suits your needs. This meticulous approach will also help you save a lot of money.
 


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Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.

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