Category: Home Loans

Important Rules to follow when getting a Home Loan

There are certain important rules that you will need to follow when it comes to getting a home loan. This type of loan can help you out a lot when it comes to getting the money you need to buy your new home, but you don’t want to rush into it. The more you learn about home loans, the better off you are going to be overall.

Never borrow more than you can realistically repay

You never want to borrow more than you think you can pay back on time. While it’s true that the lender you apply to is going to look over all of your financial details, including your income, you will still need to do the math yourself as well. Those who take out more than they can borrow usually end up defaulting on the loan, which is the last thing you want.

You could end up in a nightmarish situation if you cannot pay back your home loan, which is all the more reason for you to be sure that you can pay it back without any issues. Your credit will also take a serious hit if you don’t end up paying back your home loan on time.

Keep tenure as brief as possible

The maximum home loan tenure that is offered by most major lenders is around 30 years. The longer the tenure, the lower the EMI is going to be. This can make opting for a 25-30 year loan tempting, but it’s best to take the shortest tenure so you will be able to actually afford the loan. The interest outgo is going to be much higher if you select a longer tenure, so you will need to keep that in mind. The longer the tenure, the higher the compound interest your bank will earn from you.

Sometimes it is in fact necessary to select a longer tenure though. A young person who has a fairly low income probably won’t be able to borrow enough if the tenure is just 10 years long. Instead he will need to increase the tenure so that the EMI fits his budget. If your income is fairly high, you should definitely go with the shorter tenure because of how much money you’ll save on interest over the years.

Submit prompt and regular repayments

It’s always a good idea to submit prompt and regular repayments for your home loan so that you don’t end up getting in trouble later on down the road. Most people who keep submitting late payments on their home loan at irregular intervals usually end up defaulting on their loan at some point. It is particularly important to do this with home loans, because the last thing you want is to lose your home. Prioritize your finances so that your mortgage always comes first, because it is the most important.

Don’t borrow money just to splurge

You should always avoid borrowing money from others just so you can splurge or make investments. This is a common mistake that too many people make, and it could land you in big financial trouble in the not-too-distant future. Ultra-safe investments, such as fixed deposits and bonds, will not be able to match the rate of interest that you pay on your loan. While it may be tempting to do this, you must resist.

Take out Insurance

If you are planning on taking out a home loan, make sure that you take out insurance for it. You should buy a term plan on the same amount to ensure that your family aren’t stuck with a lot of debt if something happens to you. You never know what the future holds for you, which is why it’s such a good idea to take out insurance on your home loan.

Conclusion

The more information you get on home loans and tips to follow when getting one the better. You simply cannot be too careful when it comes to taking out a home loan, because it is probably the largest amount of money that you are ever going to borrow in your life. Those who do not bother to get this information typically regret it.

Frequently Asked Questions about Home Loans

There are so many things that you will need to know about home loans that you will definitely want to make a point of doing your research before reaching a final decision of any kind. Getting a mortgage is a very big deal, so you will therefore want to get all of your questions answered. Too many people rush into getting a home loan, and most of them end up regretting it deeply later on.

What documentation do I need to provide?

You will need to provide a number of different documents when getting a home loan, such as bank statements, car titles, employment records and more. It is important that you have all of the necessary documentation prepared so that you aren’t caught off guard at all. By getting organized you will be able to get through this process quickly.

Do I have to make a down payment?

While it is true that most people who buy a home make a down payment of some kind, you don’t necessarily have to. It is, however, recommended that you put down 10 to 20 percent of the total value of your home when getting this sort of loan. The more money you put down on your loan, the lower your interest rate is going to be. If you want to save as much money as possible on interest throughout the years, you will definitely want to think about making a sizeable down payment.

What is mortgage insurance and why is it required?

When you are going about buying a home, it is important that you purchase insurance. This insurance is required on programs where a down payment is not needed, though it is good to have regardless of whether or not you make a down payment. If you are unable to pay off your loan on time for whatever reason, this insurance policy can really help you out.

What is a balloon loan?

A ‘balloon loan’ is simply a short-term loan with payments amortized over a longer period of time. These payments are not adequate for paying off the loan in full for the pre-determined term. The remaining balance, which is called the balloon payment, is due in full upon the maturity of the note.

What is my interest rate going to be?

There are going to be a number of factors that will ultimately affect the interest rate on your home loan, including your credit. The better your credit is, the lower your interest rate is going to be. The amount that you put down on the loan is going to be another big factor in determining how much money you will end up spending on interest. It is highly recommended that you put down as much as possible on your home so that you are not stuck paying a very high interest rate for a long time.

Which lender should I choose?

You will need to make a point of taking the time to find the best possible lender to get the money for a home from, because there are quite a few of them. The more time you take to do this research, the better your chances are going to be of getting a great deal on a mortgage. The last thing you want to do is to rush into this sort of decision, because you will deeply regret it at some point. A good lender will be able to give you a good deal on the loan you need so that you don’t end up paying too much over the years.

Conclusion

When it comes to getting a home loan, there are actually quite a few things that you will need to keep in mind. Anyone who wants to buy a home will need to make sure that they do the necessary research. There are a lot of things to consider when getting a mortgage, including the lender you are going to choose and the type of interest rate (fixed or adjustable). As long as you make a point of educating yourself on your options, you should be able to get the money you need to buy your dream house without any issues.