Owning a house is a common goal today, whether it’s purchasing a flat or constructing a bungalow. To help you fulfil this dream, many banking and non-banking financial institutions offer competitive home loan packages. Schemes offered by various lending institutions come with interest rates to suit every budget.
Home loan—a word of caution
When you plan to buy your own house, you must be very clear about your financial plans. Taking a loan means an additional liability. You will be required to pay an EMI every month. And since your basic domestic expenses won’t go down, making a provision for the EMI is crucial.
You are advised to find out whether you are eligible for a home loan. This can be done by visiting the websites of various lending institutions. The document checklist for a home loan application is also available on these websites. Understanding those requirements will help you submit a loan application to an institute that is less likely to reject it.
5 ways in which a home loan can impact your financial goal
As mentioned above, your dream to own a house should be strongly supported by your financial ability to purchase one. Following are the five ways in which a home loan will impact your financial goal.
- Rate of interest
The rate of interest that will be levied on your repayment is a prime factor. You have the option of either choosing a fixed rate of interest or a floating rate of interest on your home loan.
To judge which option suits you the best, you may access the online home loan EMI calculator available on all financial institutions’ websites. Studying the EMI in advance will give a clear picture of how much you will end up paying.
- Repayment period:
The period of repayment is another important factor that affects your financial goal. While a longer loan tenure would mean less EMI, the overall payment will be more. A shorter term would mean a lesser burden of interest at the cost of a higher EMI.
- Premature termination:
Many lending institutions levy charges if you terminate your loan prematurely. Before applying for the loan, it is best to check the pre-payment terms. It will help you repay the loan if you get surplus cash in hand in the future.
- Margin money:
Margin money or down payment will determine the amount of money you borrow. Since the interest on the loan is on the borrowed amount, the down payment has a direct bearing on your financial planning.
- Shifting of loan:
If you choose to shift to another lender during your loan period to benefit from a lower interest rate, the direct saving affects your financial goals.
Purchasing a home is an important decision. You need to conduct your research and gain enough information before applying for a loan. As a borrower, you must plan well so that you can repay the loan without compromising on your creditworthiness.