The lowering of the home loan interest rate is one of the factors that may convince you that your dream home may be the possibility.
However, since the home loan is big-ticket finance, you need to ask yourself a set of questions before taking the leap.
The repayment of the home loan is going to hamper your outlays for years. It is why it becomes vital to ask yourself the following questions before applying for home loans.
Let’s discuss the most vital out of them in this post!
- Know if you want the home or the home loan
You may have decided about a home but before signing the loan deal, have you checked if your financial institute will sanction the loan? Have you got enough funds to make down payment? If you are set to finance your home purchase, you should find out all details of the home loan. Thus, even before you look for the right property, you should research your options well and compare multiple lenders. You should be aware of your credit score and know about the loan amount that will be approved. You should also check out charges levied by your banks, including for foreclosure and prepayments. If you concentrate on these factors, then you will be able to estimate an amount that you will have in the end.
- Is your job stable enough?
You should check if your job is stable enough to support the EMI payments over the tenure. With layoffs, terminations and more happening across job sectors, you should analyze if your job is stable or not. If your company is experiencing downsizing or if your salary is decreasing, then you may not be able to serve the EMIs over the loan term.
- Do you have enough funds to make the down payment?
You should be aware that banks and other institutes may not provide you with the funds for 100% value of the home. The maximum loan value could be 70-80% of the property cost. It means that the remaining 20-30% needs to be borne by the borrower. Some banks may even ask for a higher percentage of the down payment. If you add costs like registration, stamp fee, processing charges and more, then the overall expense may go up. Thus, you should check if you have enough funds to make the down payment.
- Are you prepared for financial emergencies?
You need to be aware if you are ready for any impending financial emergency or not. It is because a large amount out of your income will be directed towards home loan EMIs. Suppose a significant amount is going towards your home loan EMIs and if there is an emergency, how would you deal with it? Do you have any contingency fund to manage it? It is a major question that you should be pondering over.
- Is your spouse a co-owner or a co-borrower?
If your wife or husband is earning a higher level of income and employed with a known company, then it may help you get the loan approval. But to include him/her will be the thing that you should decide over. Also, women borrowers are offered lower home loan interest rates. Even if it is 0.5%, then you may be able to save thousands on repayments. What’s more, if you apply with your spouse, then both the husband and the wife are eligible to enjoy a tax benefit of up to Rs.2 lakh per person. It is on the interest payment in case it is your self-occupied home. It is under section 24B of the IT Act. You can save up to Rs.1.5 lakh on interest payment under section 80C.
You are now aware of the key questions that you should ask yourself before joining the home loan bandwagon.
If you are able to consider these, then you will find it easier to approach your housing finance with confidence.