5 things NOT to do while picking a home loan

Buying a home is an exciting prospect and one of the biggest investments one can make in their lives. But picking a home loan isn’t as cut and dried as it seems. Here are some of the mistakes that you should avoid when picking your home loan.

1. Selecting the lender before the property:

While it is a common practice to ascertain the loan amount one is eligible for, it is not necessary to finalise on your lender before you select your property. There are various websites which can tell you your loan eligibility, taking into account any existing loans you may have as well. You should not find yourself in a situation where you have finalised your lender but they are not ready to loan you the amount for the property you decide on later. Thus, it is best to first select your property and then find out which lenders have financed houses in the same building/locality.

2. Spending savings:

Many lenders demand to see specific amounts in terms of savings so that you can continue to repay the loan even if you lose your job. If you buy something large with your savings with the thought of avoiding an outstanding debt, you would negatively affect your application because of lower savings. Your savings amount lends security to your application and keeps the lenders mind at ease with regard to your ability to pay them back.

3. Fixed or floating rates:

With teaser rates dying out, the choice is between fixed or floating rates of interest. Fixed rate of interest stays stable throughout your loan tenure whereas floating rates change with the market conditions at the time. While fixed rates may seem like the obvious choice, it makes more sense to choose floating rates of interest. Home loans have long tenures and the market conditions are bound to change in the years which may yield a lower rate of interest, proving floating rates of interest as more astute options.

4. Starting new credit lines:

Your lender is going to gauge how reliable you are to repay your loan dependent on your credit score. If you already have an existing debt to repay, your chances of getting an approval from your lender are greatly reduced. So opening a new line of credit would be counterproductive when trying to avail of a home loan as it would show that you have other expenses which you would need to look after during the tenure of the loan.

5. Dipping into investments:

While this would not affect your home approval chances, it would greatly affect how much of a burden the loan would be in the future. Investment returns are very good crutches when repaying a loan, so it makes sense to keep them intact to reduce the amount you would need to pay out of your salary every month. It would also mean that in the event of an emergency, you would have a fail-safe to fall back on to supplement as a regular flow of income. Following these steps and keeping them in mind will greatly help you in your home loan tenure and may even help in saving money.

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• 10 tips for a best home loan experience
• 10 Factors you need to consider while taking a Home Loan
• Home Loans, things to keep in mind

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