Availing a home loan? Here’s what you should consider | The Financial Express

Availing a home loan? Here’s what you should consider

As buying a home requires large investments, an average homebuyer has no option but to look for a home loan at an attractive interest rate and at favourable terms and conditions.

Availing a home loan? Here’s what you should consider
Most homebuyers can't afford the outright payment of the entire amount to buy a house.

As buying a home requires large investments, most homebuyers can’t afford the outright payment of the entire amount. So, an average homebuyer has no option but to look for a home loan at an attractive interest rate and at favourable terms and conditions.

Jairam Sridharan, MD, Piramal Finance, describes a few things one should keep in mind when availing a home loan:

Credit score and history

Prior to applying for a home loan, the individual must be aware of their credit score and take stock of their credit history. These factors have a direct impact on loan eligibility and the interest rate at which loan can be availed, in turn influencing the financial planning and goals in the long run.

Margin money

The availability of margin money – the down payment the home buyer makes towards the total cost of the house – is another crucial factor. If this amount is not readily available, the individual must figure out a way to arrange for it. Since lenders usually account for only a certain percentage of the money one invests in a house, margin money is a good way to ensure that the individual is able to pay the down payment as well as win the faith of lenders.

Tax- saving considerations

An individual is entitled to certain tax deductions on the amount paid as repayment of the principal component on the home loan. The individual must determine the optimum loan amount to save a significant amount of tax, as well as the capping on how much exemption can be availed.

EMI and liabilities

Every loan eventually needs to be repaid and this makes it essential to determine the EMI amount one can afford. It is advisable to consider current expenditures, lifestyle, any future liabilities and related factors. Having a backup in place for unforeseen circumstances can help effectively manage the cash-flows.

Terms and conditions

Knowing all the terms and conditions of the loan before deciding to avail it, can save one from having to pay any extra charges in future. The individual must demand that the lender discuss all details related to the loan and repayment terms, and not hesitate to ask for any extra details that seem necessary.

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