The Buyt Desk
Buying a house is a big decision. You come to a conclusion only after dealing with a lot of deliberations. You go through a lot of houses. Meet a dozen brokers and figure out various locations. When you find the right house it may not fit in your budget. The house that fits in your budget may not be of your liking. Buying a house is just not a financial decision but an emotional decision too. Finally, when you are ready to make the purchase there are a host of things that you can’t ignore especially if you are planning to take a home loan.
Assess Your Repayment Capacity
The tenure of a home loan is long. It could be somewhere between 20 to 25 years. You must assess your repayment capacity. You should have a constant flow of money to ensure that you could service the loan without any breaks. Times are uncertain and if you belong to the service class then you must have a backup plan. Just in case you face a situation where you are not earning any salary you should have a fallback plan till you get back on your feet. This is where an emergency fund plays an important role. You must have an emergency fund before you start your home loan. This fund should have enough money to cover the cost of equated monthly instalment (EMI) of your home loan if in case your constant money stream faces some hiccups.
Check You Credit Worthiness
You should have a good credit score if you are planning to apply for a home loan. The 3 digit credit score is a report of your financial behaviour towards the loan. Are you a timely payer or do you delay your credit payments? How many loans have you taken? If your credit score is above 750 it’s considered to be good and you will find it easy to get a loan. A good credit score can also bring down the interest rate of your loan.
Deciding On Duration of the loan
Often borrowers feel taking a shorter tenure will be better. The sooner you pay sooner you get over with it. But do keep in mind even if you choose a longer duration you always have the option to prepay your loan before the tenure with no penalty charges. But if you take a shorter tenure and fail to pay any EMIs you will be charged with a penalty.
A Proper Homework Before You Say Yes
Prior to finalising a home you must check out and compare the home loans of various banks. Even a difference of just half a percentage can make a lot of difference in your EMI burden. Not just the interest rates but consider other costs such as the processing fees, hidden charges , flexibility of repayment and penalty if any on repayment of the loan.
Insurance cover
An insurance cover for your loan is very crucial for the financial safety of your family. In case of any untoward incident, insurance will ensure that the loan is taken care of without causing any financial distress to your family. A loan is your liability and not having a safety cover of insurance can prove to be a big burden on your family.
