HOME LOAN DECODED

When opting for a home loan, you must not simply stop at a suitable rate of interest - there are other aspects that can affect your EMI payment capacity too

AMIT SETHI

Are you planning to opt for a home loan? There are many loan varieties available in the market and you must be aware of your requirement to ensure you select the right product. Lending institutions may keep a low interest rate to attract you but they may simultaneously levy high charges that you may not figure out at the very onset.

“The Home Hunt 1.1 survey by IMGC, revealed that among the top three challenges faced by home-buyers in obtaining a loan are: high interest rates followed by a lack of loan history and difficulty in getting the desired loan amount,” says Amitava Mehra, CEO, India Mortgage Guarantee Corporation.

Importance of interest rates:
Since home loans are long-term loans, even a small variation in the interest rates can have a big impact.
“It is very important to compare the interest rates offered by various banks before finalising on one,” suggests Ajay Jain, executive director - investment banking and head real estate group, Centrum Capital Ltd.
Prepayment terms:
Shetty further adds, “Some of the key terms and conditions that borrowers must clarify before finalising a lender include those related to settlement/foreclosing the outstanding amount, transferring the balance to another lender’s account, prepaying a part or full amount of the home loan, etc.”
Processing charges:
Processing charges may be waived off as a part of a time-bound scheme or there might be other conditions associated with it. “It has been generally observed that unless the interest rate differential on the offer is substantially higher, the homebuyer, especially the end-user, would remain interest-rate-neutral to that extent,” opines Kalpesh Dave, head - corporate planning & strategy, Aspire Home Finance Coporation Ltd (AHFCL).

Apart from tax deductions, taking a home loan means you need to do an exact analysis of what you can afford. One must consider important factors like quantum of loan, flexibility of loan disbursements, prepayment clause, etc, before applying for a home loan. Some banks also provide OD (Over Draft) facility on a home loan product. They also give a loan topup facility after 12 months of regular EMI payments for general purposes.