A home loan is probably the biggest commitment you will take on, and it can run for twenty years or more. A small difference in rate or fees adds up to a large amount over that time, so it is worth spending a few days comparing before you sign.
Look at the whole cost, not just the rate
Two lenders may quote the same interest rate and still cost different amounts. Ask about the processing fee, legal and technical charges, administrative fees and any charge for changing your loan terms later. Ask for these in writing.
Know your rate type
Most home loans today are floating rate, which means your rate moves when the lender's benchmark moves. Check what the rate is linked to, how often it is reset, and what happens to your EMI or tenure when it changes. A fixed rate gives certainty but is usually priced higher.
Choose your tenure with care
A longer tenure lowers your EMI but raises the total interest. A shorter tenure does the opposite. A sensible approach is to pick a tenure with an EMI you can pay comfortably, and then make part-prepayments whenever you have extra money.
Prepayment and balance transfer
For floating-rate loans taken by individuals, lenders are not allowed to charge a prepayment penalty. Fixed-rate loans may carry charges, so check the terms. If another lender offers a meaningfully lower rate later, a balance transfer can save money, but factor in the processing fee and any other costs before deciding.
Keep your EMI within a safe limit
As a rough guide, total EMIs across all your loans should stay well under half of your monthly take-home income, and lower is better. Remember that you will also pay for maintenance, furnishing and registration.
Get your paperwork and score in order
- Check your credit score and fix any errors before applying.
- Keep income proofs, bank statements and ID documents ready.
- Verify the property's title and approvals before paying any token amount.
Tax benefits
Under the old tax regime, you can claim a deduction on the principal repaid under Section 80C and on interest under Section 24(b), subject to limits. Tax rules change, so check the current provisions or speak to a tax professional.
FinMighty TeamInvestment, loan & insurance advisors, JaipurThis article is for general information only and is not personalised financial, tax or legal advice. Please see our Disclaimer.
