top factors to consider before taking a loan

What do I need to know before asking for a home loan?

A dream of many is to have a house of their own, and a house being a great responsibility comes with many other additionalities. Making this dream come true requires a lot of capital, which, if not possible on behalf of you to accommodate, then its accommodation can be done through a home loan. A home loan can be defined as a secured loan that can be availed to buy a property by keeping it as collateral against the loan. Home loans provide high-value financing with low-interest rates and lengthy terms. 

Things you must be aware of before taking up a home loan. 

There are certain things to know before taking a home loan; these are included in a must-list. The inclusions in the list are explained well below: 

1. Benefits-

Certain benefits can be availed of from a loan. A home loan comes with lots of benefits, such as: 

  1. Tax benefits

  2. Interest rates are less

  3. Longer repayment term

  4. Zero prepayment penalty

  5. At once balance transfer 

2. Eligibility-

Banks set their eligibility list for lending home loans to their customers. A list of important factors which the bank takes into account is mentioned below:

  • Age

  • Type of Employment

  • A set of minimum annual salary/wage

  • Security of the collateral

  • Margin requirements

  • Liability and assets

  • Resident or non-resident status

3. Loan Types-

The country's demand for housing loans has substantially surged due to the rising cost of real estate. The following are some types of loans common around the market: 

  • Basic Home Loan- A basic home loan is the most common loan people take to realize their ambition of owning a home. It's a loan that allows you to scrounge capital from the lender to pay for a property of your choice. 

  • Home Construction Loan- You may want to consider a home-building loan if you own land and want to build the house of your dreams. A house construction loan is often disbursed in stages depending on how quickly the project is moving along.

  • House Extension Loan- A home extension or improvement loan is one of the most popular kinds of house loan. The same can be helpful if you currently own a house and wish to add a room or a floor. An existing home can be renovated with a home improvement or renovation loan.

  • Property Loan- If you want to buy a piece of land or build a house, you can get this financing. When you submit the necessary paperwork related to the land acquisition, the first installment of the loan is disbursed. 

  • Bridge Loan- Last, yet not a minor one. If you recently sold a home and want to use the money to purchase a new home but need additional funds, you might choose this loan. The loan assists in filling in the financial gap between buying a new home and selling an existing one.

4. Documentation:

A set of documents shall be required for verification by the lender so that the same can disburse your loan. This is a must-include in home loan tips for first-time buyers. The required documents are as follows:

  1. KYC documentation includes a Passport or any identity proof

  2. Income certificates/ Salary slip

  3. Documents of the property

5. Insurance:

You must obtain a loan cover term assurance plan to cover the loan amount. If something happens to you, this will save your family from the burden of a past-due loan.

So, these are 5 factors you should keep in mind before applying for a home loan, This will reduce the chances of your house loan being rejected to a bare minimum.

Learn Also:

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Win Harrison 10 Jul, 2023

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