Are You Taking a Home Loan? Keep These Pointers In Mind
Dec 18, 2019 Home Loan
Buying a house is a huge financial commitment, and one must make sure they are taking the right steps in the direction so that the deal and the experience do not come back to haunt them in the future. Right now, the home loan interests are at an all-time low with RBI regularly reducing their repo rates making it easier for the homebuyers to get the home loan cheaply.
The government has been making tremendous efforts continuously to revive the slow real estate market. A potential homebuyer can take advantage of the government policies and the reduced home loan rates and jump into the real estate sector for the investment.
We list down the things a homebuyer should remember before taking a home loan:
Take the loan from a recognized bank: There are many loan lending companies and financial institutions that are willing to give out home loans, some even at lower interest rates than the banks, to the potential homebuyers. To get the home loan cheaply, homebuyers fall into the foul play of these companies and end up in hot waters. The home buyer needs to take the home loan from a recognized bank and read the term and conditions properly. The legal terms are jargon are not easily understood by everyone. Hence, if one feels confused while going through the document, it is a good idea to ask for the help of a legal professional who can help you understand the terms and conditions easily.
Know the difference between floating, fixed, and repo rate linked rate of interest: Banks have to cater to a large number of customers who have different financial needs. Hence, to make it easy for every home loan borrower, the banks offer various types of home loan interest rates: floating, fixed and repo rate linked. Fixed home loan interest is the one that does not change as often and remain more or less the same throughout the loan tenure. While the floating rate of interest is the one that changes every time the bank changes its interest rate. If the bank reduced the interest rate, then the interest rate decreases. If the bank increases the interest rate increases as well.
Fixed interest rate is a good option: For the loan borrowers who want to play safe and make sure that their investment and monthly finances do not fluctuate rapidly, fixed rate of interest is the good option. Even though the rate of interest for the fixed interest is higher, it is a safe option for the homebuyers. However, the homebuyers can negotiate the fixed rate of interest with the bank. If you have a good credit score, there are chances that the bank or the financial institute will be open to negotiating and providing you with the best deal.
Repo rate link interest rates are introduced by the bank after the RBI directed the banks to link their interest rates to the repo rates. For the uninitiated, the repo rate is the rate at which the RBI lends the money to the banks and financial institutes. The RBI has been on a repo rate reduction spree, and in the last 12 months, the repo rate has reduced to an all-time low of the decade with it being at 5.4 percent now. It is important to understand that since the repo rate linked interest rate is directly linked to the repo rate, it will change as the repo rate changes. An increase in the repo rate will mean an increase in the interest rate. Reduction in repo rate will mean a reduction in interest rate.
The government has been making tremendous efforts continuously to revive the slow real estate market. A potential homebuyer can take advantage of the government policies and the reduced home loan rates and jump into the real estate sector for the investment.
We list down the things a homebuyer should remember before taking a home loan:
Take the loan from a recognized bank: There are many loan lending companies and financial institutions that are willing to give out home loans, some even at lower interest rates than the banks, to the potential homebuyers. To get the home loan cheaply, homebuyers fall into the foul play of these companies and end up in hot waters. The home buyer needs to take the home loan from a recognized bank and read the term and conditions properly. The legal terms are jargon are not easily understood by everyone. Hence, if one feels confused while going through the document, it is a good idea to ask for the help of a legal professional who can help you understand the terms and conditions easily.
Know the difference between floating, fixed, and repo rate linked rate of interest: Banks have to cater to a large number of customers who have different financial needs. Hence, to make it easy for every home loan borrower, the banks offer various types of home loan interest rates: floating, fixed and repo rate linked. Fixed home loan interest is the one that does not change as often and remain more or less the same throughout the loan tenure. While the floating rate of interest is the one that changes every time the bank changes its interest rate. If the bank reduced the interest rate, then the interest rate decreases. If the bank increases the interest rate increases as well.
Fixed interest rate is a good option: For the loan borrowers who want to play safe and make sure that their investment and monthly finances do not fluctuate rapidly, fixed rate of interest is the good option. Even though the rate of interest for the fixed interest is higher, it is a safe option for the homebuyers. However, the homebuyers can negotiate the fixed rate of interest with the bank. If you have a good credit score, there are chances that the bank or the financial institute will be open to negotiating and providing you with the best deal.
Repo rate link interest rates are introduced by the bank after the RBI directed the banks to link their interest rates to the repo rates. For the uninitiated, the repo rate is the rate at which the RBI lends the money to the banks and financial institutes. The RBI has been on a repo rate reduction spree, and in the last 12 months, the repo rate has reduced to an all-time low of the decade with it being at 5.4 percent now. It is important to understand that since the repo rate linked interest rate is directly linked to the repo rate, it will change as the repo rate changes. An increase in the repo rate will mean an increase in the interest rate. Reduction in repo rate will mean a reduction in interest rate.
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