Stick to the basics when going for home loans

Due to the boom in the real estate sector the property rates have also witnessed exponential growth. Over the years property has evolved as a very exciting investment option but with that it has also posed a hindrance to the dream of a common man to own a house.

Here the home loans have come very handy to such customers. Borrowing a home loan also consists of considerable amount of risk as they are generally very hefty and so a borrower needs to make sure before he opts for a home loan scheme that every aspect of the home loan has been taken care of.

The boost of real estate sector in the country has inspired many companies in the country to lend money to the people who aspire to have their home. As a result of it at present a person can have a lot of options of lenders and home loan schemes to choose from. But some times a borrower can find himself baffled while picking one out of them.

That is why it is very necessary for a customer to go through the loan and research well before opting for a home loan. Before going for a loan a customer must make his mind about his priorities, this will make a lot of things clear for the borrower.

To get a better idea a customer can also compare the loan schemes of various lenders that will also simplify things for him. A borrower should have a basic idea of the interest rate prevailing so that he could make the most out of the deal.

If a borrower sticks to the basics then he can get the best deal with a lender and also a vigil customer will always get away with the best deal he can have.

Enjoy peace of mind with preapproved loans

The home loan market is on a high, there are a lot of lenders available in the market to cater to the financial requirements of people. There is a lot of competition and that’s why to lure more and more customers they introduce new and attractive schemes. One out of them is preapproved home loans.

Now a person can get a home loan even before he has finalized the property that he wants to buy it. The application procedure is more or less the same as for a normal loan; but the loan is disbursed only when the property has been finalized.

Here also the repayment capacity, monthly income and the credit background of the borrower holds the key to the loan. With this loan some terms and conditions are also applicable. This type of loan has a validity period that can differ from one lender to another in which the borrower needs to finalize the property that he wants to purchase.

A spokesman from HDFC bank said "There is no typical period within which the loan seeker is required to avail of the disbursement. However, we keep the file open for six months and if the applicant does not act within this period, we send reminders to the individual."

The borrower will be charged with the interest rate applicable at the time sanctioning of loan. Such loan can definitely give mental peace to the borrower as home loan can be really tricky some times. The other good thing with such loans is that the processing time is less than normal loans.

The Executive Vice President, retail assets, Kotak Mahindra Bank, Mr. Kamlesh Rao said "In the event of the borrower (with a pre approved home loan) finding it difficult to take a decision, the bank may direct him to the right kind of project. Thus, if both the loan as well as the project is pre-approved, the processing will be much shorter."

Way out to pre-payment penalty

To lure more and more customers, the home lenders have come up with a lot of home loan schemes, offering the customers a lot of options. Apart from adding new customers, due to rising competition the lenders are taking necessary steps to discourage borrower to switch loan.

To discourage such trends the banks levy pre-payment penalty. This is the penalty that a borrower is levied with if he wants to repay the loan before the original loan duration. A lot of banks have even have hiked the amount levied as pre-payment penalty in order to minimize the loss caused to pre- payment of the loan.

The best way out of this situation is that a borrower can go for a loan scheme where there is no penalty on pre-payment or if avoiding penalty is not possible then a borrower can look for a loan with least possible penalty.

Fixed or floating , which rate to go for?

If a choice is give to a person who does not have much of knowledge about home loans between fixed and floating interest rates given the present day situation in which the interest rates are soaring then at a first go he might give a thought to the fixed rate scheme. But is it is so, are the interest rates under fixed loan scheme really fixed?

The answer to that question is no. The banks generally reset the fixed interest rates offered to the customers in after every 2 or 3 years, depending on the market situation. Apart from that, the interest rates under the fixed rate scheme are far much costlier than the interest rates under floating rate scheme.

Talking about the floating interest rate scheme, they are very volatile in nature specially in the times that we live in. the rate of interest are on a constant high and each time there is a hike in the interest rate the burden of EMI on a borrower increases.

There is very little that a customer could possibly do about all this but he sure is left with a few options. Like if a borrower feels that he will not be able to afford such high EMIs then he can request the bank to increase the loan term or if a borrower can also prepay the loan. However if the borrower is prepaying the loan amount other than his own sources then most of the banks levy prepayment penalty on the customer.

Whatever the case might be, floating or teaser loan scheme is a far better option than the fixed interest rate scheme.