The next step after selecting the property you wish to buy is the sanction of a home loan which has an essential component named the interest rate. This is the additional sum of the amount which you are required to pay in exchange for availing a home loan either from a bank or from any other financial institution.
Being an aspiring home buyer or a current owner looking to buy a second home, you must be aware of the increase in the interest rate which takes place mainly due to two reasons. Firstly, the hike in an interest rate on a home loan is due to the change in Cash Reserve Ratio [CRR] set by the RBI [Reserve Bank of India] at a regular interval and the impact of the property market apart from the demand and supply of properties. This affects the budget of a family as there are other things to pay for such as the educational fees, bills and many other things. So, here we have listed the top things you must look when applying for a home loan:
1. Save for Prepayment
The first and the foremost thing you are required to do is to start saving money ever since you think about owning a home. This is an important step as you must pay some amount in bulk at the time when the Equated Monthly Installments that are [EMIs] begins. This will offer relaxation to you as the number of EMIs will fall by a couple of numbers due to which the increase in the interest rate won’t affect you much.
2. Buy a Home Timely
Like we always said that everything should be accomplished timely and thus home buying is also one of the things you must perform in a timely manner. As, the change in property prices, market trend, the supply of housing units and the increase in the interest rate can make the property purchase out of your budget. So, assess the market trend and your budget. Also, focus on buying a residential property in a timely manner.
3. Prefer Fixed Interest Rate
There are two types of interest rates one is the fix interest rate and the other is floating interest rate. So, don’t run behind the advantage that you can avail in case the floating interest rate witnesses a dip. Always opt for the fixed interest rate as it maintains the EMI under all circumstances. This is the right kind of interest rate as it safeguards your budget and also ensures the timely payment of the Monthly Equated Installments that are the EMIs.
4. Pay in Bulk at Different Interval
Keep depositing a Lumpsum amount of money into the home loan account. This activity reflects directly onto the EMIs and you get the benefit of submitting huge amount into the account in one go. So, save more on the interest rate by paying some Lumpsum amount timely.
5. Switch Home Loan to Another Bank/Financial Institutions
Now there is no rigidness to continue the home loan from the bank/financial institution which sanctioned the same. The availability of the option to switch between the loan borrowers can make you save huge money as one is only required to switch between the home loan lender after comparing the interest rate of all banks/other financial institution what allow funding for the purchase of a home.
These are the main things to consider while finalizing a home buying deal as people feel scared of the increase in the interest rate which is payable on the home loan amount.