Hyderabad: Home loan is a long-term liability because interest rates rise and fall several times during this period. Hence, it is better to take precautions while taking a loan. Only then the debt burden will be reduced and your aims to achieve other goals will become easier. What is the loan amount? How long should I choose? Are there difficulties in paying the instalments? There are many things to consider in addition to these before deciding to take a loan.
Why buy a house? Do you live in it? Otherwise, is it an investment option? If you own one, how should the house be for your family's needs? How much area is required and what are the facilities? Amenities around you, development opportunities. All of these should be looked at. While looking at the investment focus, how much the return on your investment can come, how the growth will be... things like rental income should be considered. Once all these factors are analysed, you take the decision. At the same time, tax benefits should be assessed.
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Most people want to buy a house with all the amenities in a well-known area. But, our economic power may not be enough for that. How much can you spend on a house before calculating .. think about the rest? Do not forget that expectations are very different from facts. With the idea that the income will increase in the future, attempts are being made to take some more debt now. But, this is not correct. It should not become a burden to you since you bought the house. Do not change the decision to buy the house for the amount you had decided before taking the loan. Do not borrow unnecessarily large sums and get into trouble in the future.
When we want to buy a house we have to pay a certain amount from our savings and it is called Margin Money. Banks usually lend up to 75-90% of the value of the home. The rest we have to provide. In addition, we have to bear the cost of registration and interior decoration. Margin money is determined based on the age of the borrower, credit score, loan amount and percentage of the loan at home value. Calculate in advance how much of this money you can afford. Do not spend all the money from your hand to influence your other financial goals.
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Credit score
Most banks currently set mortgage interest rates based on the borrower's credit score. Those with a lower credit score charge higher interest rates. So, if you do not want to have a high-interest rate, manage your credit score carefully. Over 750-800 is considered a good score, not just when applying for a loan and you should maintain that score till you clear the loan.
Monthly instalments
As we assumed housing is a long term responsibility. How many other debts do you already have when applying for this loan? What is the amount of instalments being paid for them? Will I have to take out any other loans in the future? Have to think about them before taking a loan. Similarly, if you have existing loans, you reduce your repayment power. In the future, you may need to take loans for your children's education. So, the burden of EMIs on you is high when you take a new loan. Depending on your expenses and other obligations, it is best to decide the loan amount based on how much EMI you can afford rather than how much loan you will be sanctioned. After that, choose banks with low-interest rates and processing fees.
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What is your income?
Before applying for a home loan, you need to ask yourself how well you are financially prepared. Do you get regular income for as long as the loan lasts? Make sure. One should try to establish more than one source of income. Banks will sanction loans based on your income and when you feel like your income is not sufficient for the loan processing, you can add your wife as a co-applicant. The loan eligibility increases when applying for a joint loan and women also get discounts on interest rates.
Insurance is mandatory
Insurance provides financial security for the family. Don’t forget to take a life insurance policy to that extent when buying a home. In case of any unforeseen circumstances, arrangements should be made to repay the loan with that insurance policy. Term policy or home loan protection policies can be selected for this.
For other purposes ...
Buying a home is important, but it is not appropriate to neglect other financial objectives for this. Requirements such as retirement planning, children's higher education and their marriage should also be taken into consideration. Your home loan should not erode your financial freedom. If such a situation seems to be arising it is better to put taking a home loan on the back burner or reduce the budget. With that, your other goals will not be in trouble. It is better to take a home loan only when you think you can adjust your income that way, says Adhil Shetty, CEO, Bankbazaar.com.
