What all I need to keep in mind before taking a home loan?

Torbit - July 09, 2023 - - 0 |
keep in mind before taking a home loan?

To start with you should see how much savings you have to fund about 20 percent of the cost of the property as you may get a loan amounting to  80% of the total cost of the property.  You should also look at how steady your source of income is. Because if there is a disruption in your regular income and you do not have enough savings, you may end up defaulting in home loan repayments. This has its own implications. This will erode your credit worthiness and impact your future borrowings.

To get a home loan at a low interest rate, you must maintain a healthy credit score with timely payments for your car loan, education loan, credit card dues. This will help you maintain a high credit score, in turn getting the loan at a lower rate, thereby lessening your EMI burden.  Also, if you can afford it, it is a good idea to make a higher down payment. This will reduce your EMI load.

Also, keep in mind that interest rates on housing loans for self-employed individuals are higher than salaried people. This difference can be 0.5% or more. It depends on your credit history also. Before applying for a loan, you should be aware of other fees and charges.

While planning to take a home loan to fund your home purchase, you should not forget that the property price mentioned by developers is not all-inclusive. You should take into consideration transaction cost and all other associated expenses. These include GST. There is 5% GST on standard homes under construction while affordable homes below the price of Rs 45 lakh  attract 1% GST. There is no GST on ready-to-move homes. Besides GST, there is another substantial cost in the form of registration and stamp duty charges which may vary from state to state ( mosty 5-7% of the property cost). You can make a saving of about 0.5% if the property is registered in the name of a woman.In terms of additional expenses, one should account for brokerage fees.  Generally, club charges and parking charges are also extra. One should also ascertain if the modular kitchen is included in the cost. Similarly one should account for the cost of furnishing a home which can be anywhere between 5% and 7% of the cost of the home.

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