On deciding to purchase a house, you need to first go through a time taking exercise of identifying the location of the property and then going through a thorough search of the legalities and then arrange for funds to purchase the chosen property.
With the price of property raising you would not want to invest (even in case you have the fund) your hard earned, life-time savings and be broke. Here is where a Home Loan comes in very useful and is helpful in major funding for your purchase of the property.
Home Loan is a loan where you have to pay a percentage of the total purchase price as down payment and the balance is provided by the bank or the Housing Loan providing NBFC as loan with a long repayment period in Equated Monthly Instalments (EMI).
At least 90% of the property purchase price is paid by the Loan providing institutions, which is treated as a loan to the purchaser and is realised from him/her as EMI, over loan prepayment tenure extending upto a maximum of 30 years depending upon prerequisite eligibility conditions.
Even while getting a home loan has become easy it is very important to estimate the amount of EMI one can afford in the long run as defaulting on EMI payment will lead to payment of extra interest and subsequent charges, putting a strain on ones savings as well as adversely affecting your CIBIL Score and your credit worthiness.
Timely payment of your Home Loan EMI is very important.
It reduces your long-term financial burden; helps maintain a good CIBIL Score thus making you eligible for further loan of any kind, across all banks and NBFCs.
Defaulting in payment of EMI for a long period could lead to seizure of the mortgaged property and subsequent auctioning to realise the due loan amount. However, before taking the extreme step banks/NBFCs provide time to the defaulter to repay.
Consider your income level before buying a Home on Loan.
While you will have to provide proof of income before your loan is sanctioned you need to consider other cash-outs like maintenance charges, monthly subscription towards amenities in a housing complex. These will not be covered by the loan amount and you will have to make provisions for such expenses separately.
Consider a longer Loan Repayment Tenure if you have more years before retirement.
This keeps your EMI amount low thus making it easier for you to stick to meeting EMI payment deadlines. This would also allow you to prepay the loan amount if and when you have surplus funds saved from your earnings.
Pay EMIs through ECS/ Auto Debit from your saving bank account.
Once you fill up and submit the ECS/ Auto Debit mandate form to your bank the EMI will be paid on the pre-decided due date by your bank account being debited and your loan account being credited directly, hence leaving little chance of becoming a defaulter. This also saves you from the hassles of physically visiting the bank, writing out cheques, and avoiding possibility of cheque being returned due to errors like wrong payee name, wrong amount written on the cheque or overwriting on the cheque, etc.
Always provide for a Contingency Fund.
Keep aside some amount from your regular monthly earnings to build up a buffer fundto take care of at least eight to nine months’ EMI payment should there be any eventualities like delay in disbursal of salary, temporary loss of salary due to loss of job,reduction in monthly earnings, etc.
Please keep in mind the above important points before applying for a Home Loan.