The Why and How of Home Loans

The debate between whether living in a self-owned home is better than living in a rented home is something that has been running since ages. Both have their pros and cons but the biggest hurdle more often than not in purchasing a home is the budget. This is where home loans come in. Home loans give people the funds to purchase and live in their dream homes. Thanks to trusted financial institutes, like Indiabulls Housing Finance, present out there, the process of applying a Home Loan becomes easy and systematic.

Things a Home Loan seeker should know:

Applying for a home loan

You can customize your home loan to choose your requirements. Before applying for a home loan, check your CIBIL score as it decides your creditworthiness. Ensure that you have a blemish-free credit record before you start the loan application process. If your CIBIL score is quite high, you can negotiate with the home loan provider and ask for a lower interest rate, waiver of processing fees etc. You may opt for a fixed interest rate or floating interest rate depending on your requirement and budget.

You need to manage your financials before applying for a home loan. Take stock of your assets, liabilities, and financial responsibilities. See how much money you have to set aside monthly for your daily living expenses and savings. After that, figure how much money you have to pay for the home loan EMI. You can use home loan EMI calculators, available on different websites. Most housing loans give you a long-term tenure to pay back. Considering all these factors can help you arrive on a reasonable loan amount that you can easily afford.

Keep all your documents handy before applying for a home loan. Your loan provider, as well as aggregator websites, will give you a list of the required documents. It also is wise to consider insurance options to cover your home loan liability so that you are covered in case of an emergency.

Once you apply for a home loan and it is sanctioned, see how you want the disbursement to happen. It can happen in one full amount or in installments. If the property is under construction, many loan providers will disburse loans in installments based on the construction’s progress (this will be assessed by the provider). A full loan amount disbursement is done in case of the property is fully constructed.

Closing the loan

You have multiple options of closing your loan. When you apply for a home loan, you can discuss the same with your provider. You can pre-close the loan before its original tenure ends. There are some pre-closure charges if you are on a fixed interest rate. No charge is applicable if you are on a floating interest rate. You could also partially pre-pay the loan amount by paying the provider an additional amount (other than the EMI). This contributes towards reducing the principal amount and hence the interest is calculated on the reduced amount. The more you prepay and the longer you prepay for, the more will be your savings.

Accruing tax benefit

Your home loan provider gives you a statement at the start of the year detailing out the principal and interest amount due to the provider that year. They again give you a statement at year-end stating how much you have repaid. You can use this statement to get a tax benefit from your employer.

To conclude, home loans offer a plethora of features and benefits that can help you take a step closer towards your dream home. Do your homework wisely and take the plunge!

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