Today, most people willing to buy a real estate property invariably rely on loan to purchase their dream home. Although several lenders in the market offer housing loans at competitive rates, it is important that you are careful about availing the same. You have to show some restraints and follow a few fundamental rules, which are discussed below to get the best deal.
Know your limitation
A lot of people tend to become over-ambitious when it comes to borrowing loan against property; they tend to borrow more than their financial capability and eventually struggle to repay the amount. To avoid risking the property being seized by the lender, you need to first assess your current financial condition and determine the maximum amount you can afford to spare EMIs. Make sure that you take all your present and future expenses into consideration. The EMI amount should not exceed 40-50% of your taxable income. If the EMIs eat up a large chunk of your expense, you may either have to compromise on your other expenses or you can consider looking for another property that doesn’t require as much investment.
Avail loan for a shorter duration
Most lenders tend to lure the customers with long-term loan. While the EMIs for such loans are much lesser; you need to be aware that you have to pay that amount for a longer duration, which ultimately would contribute to a huge amount. The financial experts, therefore, advise the novice borrowers to opt for a loan for a shorter duration; not more than 15 years.
Don’t default on your payments
Non-payment of the EMI will not only attract penalties, but irregularities in repayment would severely affect your credit score, which in turn would have repercussion on your future borrowings. When it comes to repaying the mortgage loan, it is imperative to be disciplined. Make sure that your plan your finances well; it is best advised to build a cash reserve so that you can repay the EMIs for up to 6 months even if you do not have any income.
If you are borrowing a huge amount, it is highly recommended that you take an insurance cover as well. Although it would add to your initial loan cost, it would surely be worthwhile in the long run and in unforeseen circumstances like loss of income or any medical emergency arising in the family. Usually, most lenders offer a term cover that provides insurance, which is equivalent to the outstanding amount.
Understand the terms and conditions well
Before you sign on any dotted lines, it is important that you read the loan documents and understand the terms and conditions mentioned therein. If you find it difficult to understand the technical terms, you can hire a real estate lawyer or any other expert to help you understand its meaning and the legal implications. Remember, the loan offer document has legal binding, and once you sign the paper, you are obliged to follow the terms.