Funding your new home in 2012
A checklist of things to consider while taking a home loan on Installments
Buying your dream home is now easier than ever before. More and more people now are opting to buy a house when they are very young. One of the reasons for this is the fact that it is now easy to get a home loan. There are more options for home loans than ever before - over a hundred at least, if you add all the banks and housing finance companies. In such a scenario, how does one decide which home loan provider to go with? Here is a check list of factors that you must consider before making that decision.
Loan amount:
Different loan providers have different ways of determining the loan amount that they are willing to sanction to an individual. In the event that you are not able to get the loan that you need from one provider, you could check with one or two others. The loan amount, however, is limited to 80% of the value of the property being purchased.
Loan tenure
Most borrowers want to pay off their loans as soon as possible and opt for short tenure with high EMIs. However for a young borrower, it is advisable to opt for a longer tenure; the longer the tenure of the loan, the lower the monthly installment payable. One can however choose to prepay the loan whenever there are funds available. Most home loan providers today do not charge any penalty for pre-closure of home loans.
Rates, fees and charges
You should check the cost of your loan under various heads, before making your choice. These include - the interest rate payable on the loan, the one-time fee, documentation or stamping fees and prepayment fee when you close the loan.
Interest rates in the economy
Over the past year and a half the RBI has increased the policy rates several times; the home loan rates for prime borrowers have increased from 8.25% in early 2010 to 11.25% now. This has resulted in EMIs going up by 25%. Hence, at the time of availing the loan, one needs to be prepared for the possibility that interest rates may further go up and budget for the increase in EMIs.
Insure your home loan
It is advisable to insure your home loan so in the event of any unfortunate event, your family is spared the additional financial pressure of repaying the home loan.The insurance premium can be funded by the home loan provider and you can pay the same along with your monthly installments.
Tax benefits
There are tax benefits available on the interest as well as the principal repaid on a home loan. These benefits are available for self occupied as well as rented property. It is important to understand the tax benefits that you will be eligible for when you take a home loan. The tax saved could be used to plan for a higher loan amount
Over and above all these factors, you should ensure that your financial situation is comfortable enough to ensure a committed monthly repayment of your installment for an extended period of time. Wish you all the best as you make your choice.
A checklist of things to consider while taking a home loan on Installments
Buying your dream home is now easier than ever before. More and more people now are opting to buy a house when they are very young. One of the reasons for this is the fact that it is now easy to get a home loan. There are more options for home loans than ever before - over a hundred at least, if you add all the banks and housing finance companies. In such a scenario, how does one decide which home loan provider to go with? Here is a check list of factors that you must consider before making that decision.
Loan amount:
Different loan providers have different ways of determining the loan amount that they are willing to sanction to an individual. In the event that you are not able to get the loan that you need from one provider, you could check with one or two others. The loan amount, however, is limited to 80% of the value of the property being purchased.
Loan tenure
Most borrowers want to pay off their loans as soon as possible and opt for short tenure with high EMIs. However for a young borrower, it is advisable to opt for a longer tenure; the longer the tenure of the loan, the lower the monthly installment payable. One can however choose to prepay the loan whenever there are funds available. Most home loan providers today do not charge any penalty for pre-closure of home loans.
Rates, fees and charges
You should check the cost of your loan under various heads, before making your choice. These include - the interest rate payable on the loan, the one-time fee, documentation or stamping fees and prepayment fee when you close the loan.
Interest rates in the economy
Over the past year and a half the RBI has increased the policy rates several times; the home loan rates for prime borrowers have increased from 8.25% in early 2010 to 11.25% now. This has resulted in EMIs going up by 25%. Hence, at the time of availing the loan, one needs to be prepared for the possibility that interest rates may further go up and budget for the increase in EMIs.
Insure your home loan
It is advisable to insure your home loan so in the event of any unfortunate event, your family is spared the additional financial pressure of repaying the home loan.The insurance premium can be funded by the home loan provider and you can pay the same along with your monthly installments.
Tax benefits
There are tax benefits available on the interest as well as the principal repaid on a home loan. These benefits are available for self occupied as well as rented property. It is important to understand the tax benefits that you will be eligible for when you take a home loan. The tax saved could be used to plan for a higher loan amount
Over and above all these factors, you should ensure that your financial situation is comfortable enough to ensure a committed monthly repayment of your installment for an extended period of time. Wish you all the best as you make your choice.
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