Once you are sure that this is the right time to shift from a rented apartment to your own home, a whole new set of questions start popping up in your mind. Before making that property investment, choosing the right home loan is important. Nowadays, numerous financial corporations are providing home loan facilities to the customers and these loan products are also offered in varied specifications. In the midst of a plethora of home loan options, it is hard for the customer to choose the kind of loan that best suits his risk profile.
Before starting the home loan hunt, you should first analyse your own risk profile. Ask yourself whether you are in a position to commit to a long term repayment process. After you have properly analysed financial condition over the next ten years, consider the following factors to choose the right home loan:
Shop Around for the Right Product- You should definitely seek people’s advice before choosing a lender. But do not blindly go after someone’s advice; research on your own. Talk to different lenders and see what they have on offer. In addition to the interest rate component, also compare other costs that constitute the prepayment amount such as processing fees.
Compare Interest Rates- As the rate of interest charged by the lender determines the amount of your monthly EMI, it is the most important component that needs to be considered. You can either opt for fixed rate or floating rate. Usually the lenders incur lesser risk in case of floating rates, they may try to sell you the same but you should select the one that suits your risk profile. Some banks also offer hybrid rate of interest which is a mix of both fixed and floating.
Check the Lender’s Service Standards- Another important home loan consideration should be about your own convenience. After all prerequisites are met from your side, ask about the standard procedure followed by the bank for credit appraisal. Also confirm the loan disbursal process. Factors such as customer support, after sale services, etc. are also important.
Balance Transfer- Banks also offer a facility wherein you can transfer your balance loan amount to another bank. The lenders are hesitant about answering this question, but for your own convenience you must ask.
Ask about Bullet Payments- Bullet payments are the lump sum amount you can pay to the bank to get rid of the home loan faster. It is a loss for the bank so they only allow a certain numbers of bullet payments after which they charge a penalty. Before applying for the loan, confirm how many bullet payments do they allow.
Compare the pros and cons of all the lenders before selecting one. It’s important to know the exact loan structure and then take the final step towards your dream home.