Top 5 Rules for Home Loans
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Introduction
This article lists Top 5 Rules while applying for the home loans. I have 
already posted many articles explaining the various topic on home loans. This article intend to list the top five rules important for the home loan buyers. Remember these five rules if you are planning to get the new home loans. There may be some important factors which I missed it here, if you have anything in mind please post it in the comments sections. If you like the article subscribe to this blog here.
Top 5 Rules for Home Loans
1. Documents and Processing Fees
Before apply for the home loans, good idea to list the required documents and eligibility criteria in the banks. It is not the same for all the banks, the requirement will be different depend on the banks. Government banks will have more strict eligibility criteria like higher monthly income and the current residential property details. Where as private banks don’t have that many requirements as with public banks. However you have to consult the banks and get ready with all the documents. Insufficient documents may lead to rejection of your loan application.
When you are applying for a home loan, the bank will charge you certain amount as the processing fees. That will be included in the total home loans amount. Normally the processing fees differs from each bank like 0.5% – 1.0%. Banks will use the processing fees to verify your documents and all the formalities to complete the loan processing.
2. Interest Rates and Tenure
Interest rate is another important factor determining your tenure of the loan. If the rates are high, you will be forced to extend more EMI’s and the loan duration also will be increased. Be knowledgeable on the different types of interest rates like Flat Rate, Floating Rate,etc. The interest rates play the important role in closing the loans easily. For example, if you have chosen the floating rate(EMI will be calculated basis on the current market rate), if the rates are going up then your actual EMI’s also will be extended. It will end up paying for longer than usual.
3. Switching Fees and Foreclosure Charges
If you have taken a loan in a bank for the duration of 25 years. After completing the initial 15 years then there is a significant rate drop by another bank which may benefit you if you have switched your loan to that bank. When you are switching your loan to another bank, it may involve switching fees, at the specific percentage on the outstanding loan amount. It is better to learn the switching fees involved for your bank.
Foreclosure charges are when you are planning to close the loan before the tenure is completed. Bank will charge you certain percentage on outstanding loan amount as the penalty for fore closing the loans. Normally the bank charges 3% t0 5%. It varies depend on the banker.
4. Disbursement Stages
When you apply for the home loans, most of the time banker and builders will have a discussion and process the papers. If you are not aware of the money disbursement, please ask your banker that whether they will be releasing the fund at the beginning or at stages of completion of the project. You have rights to insist them to pay only the part of money if the house is still in the construction phase. Pre-EMI will come into the picture when the partial disbursement happens.
5. Type of Loans
There is many types of home loans available in the market. You cannot predict any future expenses when the home construction is under progress. The existing home loans provide many options like Home Loans Improvement, Home Loans Top Up, etc. to fund your home extention and personal expenses. It is added to the home loans and extend to the EMI’s. Discuss with the banker for more details about the home loans products available with them.
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3 Comments on this post
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sri said:
My question on composite loans.
if i purchase a land and construct an house with in 3 months of purchase. , will i get a benefit immediately after the first EMI,
May 14th, 2010 at 12:46 am -
subala said:
hi, I ahve taken HDFC home loan. looking for the best home loan insurance @ competitive single/yearly premium. now a days the insurance covers jobless, EMI will betaken care by the company. if any company come across with is this feature, pl. do let me.
thanks,
subalaMay 14th, 2010 at 4:29 am -
Resha Singh said:
I am planning to take a new apartment in Pune. The construction of the building will start from May 2011. The value of the property is 40 lks. The builder wants us to pay booking amount of 10% and once the construction will be started will start paying the Pre EMI till May 2013.
My question is will i get the tax benefit for paying the booking amount once teh construction is completed?
June 22nd, 2010 at 11:10 am
