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Things to Know Before Taking a Home Loan: Essential Tips and Advice
Introduction:
Taking a Home Loan is one of the most important financial decisions a person is likely to make in his/her lifetime. Buying a home is a long-term investment that requires careful planning and preparation. Before you decide to get a Home Loan, you must not only know the answer to “how much loan can I get?” but also factor in some other important points.
In this blog, we will guide you through some essential things you should look at before getting a loan to buy a house or commercial property. You can also familiarise yourself with two important aspects of Home Loans - how to get a Pre-approved Home Loan and the use of a Home Loan Eligibility Calculator.
What You Should Know Before Taking a Home Loan
1. Know Your Finances – It is important to know how your finances are and how they will shape up in the future before you take a Home Loan. Before you apply for a loan, look at your income, monthly expenses, assets, securities and liabilities. Lenders will assess this and look at your credit score, debt-to-income ratio and perhaps a few more financial details to determine your eligibility for a Home Loan. If your credit score is low, you may need to work towards improving it before you apply to avoid rejection of your loan application. You should also try to minimise your debt and increase your savings.
2. Choose the Right Financial Partner - Choosing the right financial institution can make all the difference with respect to your loan terms and repayment journey. The Indian credit market has plenty of lenders: you need to find one who can offer you competitive interest rates, flexible repayment options and good customer service. You must be aware of the lender's reputation and read reviews about customer care before applying for a Home Loan. ICICI Bank is a leading provider of Home Loans for both residential and commercial properties in India with attractive interest rates and flexible repayment options for the greater convenience of our customers.
3. Know Your Options - Having options and weighing them instead of settling for the first (or only) loan you get approval for is the right way to go about it. Various types of Home Loans are available at leading financial institutions such as fixed-rate loans, floating-rate loans and even hybrid loans. Fixed-rate loans offer a fixed interest rate throughout the loan tenure whereas floating-rate loans come with interest rates that can fluctuate depending on the market conditions. Hybrid loans are a combination of fixed and floating-rate loans. You need to understand the pros and cons of each option before choosing the right one.
4. How to get a Pre-approved Home Loan - If you’ve been banking with a particular institution, you may be eligible for getting a Pre-approved Home Loan. Pre-approval is when a lender knows you are a trusted partner, assesses your financial situation and determines how much they can lend you. To get a Pre-approved Home Loan, you need to submit your financial details to the lender including your income, expenses, assets and liabilities. Select customers of ICICI Bank can get pre-approval and instant online sanction for a Home Loan without any documentation. This can give you a better idea of how much you can afford to borrow.
5. Home Loan Eligibility Calculator- A Home Loan Eligibility Calculator is a great tool that can help you determine your eligibility for a Home Loan. It takes into account your income, expenses, assets and liabilities to calculate how much money you can borrow. It can also help you get a fair idea about the EMI (equated monthly instalment) you will need to pay based on the loan amount, interest rate and loan tenure. Use ICICI Bank’s Home Loan Eligibility Calculator and get an estimate of how much you can borrow and how much EMI you’ll have to pay over the loan tenure.
6. Understand the Loan Repayment Process - When you take out any loan, you have to understand how the loan repayment process works. You need to know the EMI amount, loan tenure and interest rate of your Home Loan. Understand the repercussions of missing an EMI payment or defaulting on your loan altogether. This should help you be confident about making regular payments, avoiding penalties and paying off the loan on time.
7. Know the Additional Costs Involved - Getting a Home Loan involves more than just the principal loan amount you have to pay off with interest. Several additional costs include processing fees, stamp duty, registration fees and legal fees. You need to factor in these costs when calculating the total outlay of your Home Loan. Check whether you are eligible for any special or low processing fees with your financial institution. You should also consider the cost of insurance and maintenance when buying a home.
Things to Consider Before Settling on a Place to Call Home?
When searching for a new place consider these points before making a decision
Location: Consider things like proximity to work, school, shopping, entertainment and public transportation
Safety: Look for a safe neighbourhood
Size and layout: Ensure the place is large enough to accommodate your needs with a layout that suits your lifestyle
Condition of the property: Look out for signs of wear and tear including cracks, leaks and water damage.
Age of the home: See if the home is new or old and if it has any historical or architectural significance.
Natural light: Consider the amount of natural light the home receives as well as the orientation of the property.
Outdoor space: If you enjoy spending time outdoors, look for a home with a yard, patio or balcony.
Storage: Ensure the home has sufficient storage space for your belongings including closets, cabinets and a garage if possible.
Noise level: Consider the amount of noise in the neighbourhood from traffic, construction and nearby businesses.
Future potential: Think about how the home may meet your future needs including the potential for renovations or additions and the resale value.
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