Buying a home is the most important investment decision of your life, you may not have thought it in that way but this is an investment which you do with your savings (down payment) and regular tranches of money (EMIs). EMIs are the most disciplined way to invest. When you buy your first home one of the most important decisions is the Home loan.
What all you need to consider ?
The basic of home loan is that the EMIs of the home loans should not overburden you and at the same time it should help you for your investment (the home).
How much should be maximum EMI: Generally the financial institutions take care of this aspect. A crude way to decide this is 60% of your monthly salary. Sometimes you may choose to go above this level as well as the home you like needs a stretch. Nothing wrong in stretching until unless you believe this stretch is not going to be too long.
My experience says most of the people go for the stretch and it’s worth it.
But on a safer side Don’t make aggressive decisions, you may end up paying penalties due to non payment of EMI on time can prove to be more troublesome.
Interest rate: In today’s market banks and NBFIs are standing on your doorstep to offer you a home loan. You are the king, use this opportunity and negotiate for best home loan rates. Now a days you can get the details of ongoing interest rates on the bank’s website or there are websites (like LetsBHK.com) which would be having it all at one place.
Beware of add ons: One of the important things which you should remain vigilant is add ons and charges. Many representatives would like to sell few products like insurance, investment products, just make sure you buy what you want not what they want to sell. Home insurance is good to buy but it should not be too expensive. Read our post on Home insurance
What’s in the fine prints: Home loan agreement with your bank is a bulky document but a lot depends on this hence make sure you read it thoroughly. If you dont agree to certain points raise it, this is just a agreement and can be amended if your view make sense. Sometimes, lenders may nod to certain points but in the end whatever is present on the paper will only be taken into consideration. So it is best if you could just spend some extra time reading the document carefully rather than getting stuck in complications related to the same later on. Golden rule, never sign on a blank loan paper even if the sales person asks you to sign. Ask questions its your right to understand every term and condition mentioned in the loan agreement.
Should I directly apply for loan or take help of someone. : If the services are free why not, using the services for home loans from DSAs or websites may be a good idea because :
There expertise may help you in completion of documentation at once.
No need to visit branch, why waste a weekend on this.
Some of these service providers (LetsBHK Home loan) also provide tax advice from CAs.
Always pay your dues on time including your credit card payments, all these impacts your CIBIL points and your bargaining power with banks.
Keep a watch on movement of home loan rates, sometimes its beneficial to change the bank (Read our post: Time to review your home loan)
Keep a watch on your amortisation schedule, so that you know where you stand.
All the best for your new home, keep investing keep gaining.
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