Taking a home loan? Avoid these mistakes
Interest on home loans is now at a historic low and gradually stoking demand in the realty sectorm which is crucial for the economy.
A home loan is a long-term commitment for most borrowers. Taking a home loan requires proper assessment and planning. Any wrong decision can spell a lot of trouble for the borrower. The tenure of a home loan usually goes up to 20-25 years or even 30 years. Of late, the interest has come down to record 6.5%-6.75% levels. If you are looking to take a home loan, make sure you avoid these most common mistakes homebuyers do:
Ignoring credit score
If you are planning to take a home loan, it is very important to keep the credit score healthy. It is one of the most important steps before submitting a loan application. A credit score above 750 is considered a good credit score. One can get a home loan easily and lower interest rates if he or she maintains a good credit score.
Not comparing offers
Home loan is a long-term commitment. Therefore, even an apparently minor half a percentage difference in interest rates can make a lot of difference to the amount of money the borrower repays to the lender at the end of the tenure. Therefore, scanning the market for cheap rates is a must before taking the plunge. One must check all of them before selecting a lender.
Short tenure
You can opt for home loans for tenure of up to 30 years. But if you want to repay the home loan before stipulated time, in general banks do not charge any prepayment penalty. On the other hand, if you have taken a home loan for a short tenure and failed to repay an instalment on time, you might have to pay penalties. It will also spoil your CIBIL score. So, it is better to opt for a longer duration home loan to ease your EMI burden.
Not consider repayment capacity
If you take a home loan, you have to repay it regularly for a long time. Before opting a loan, you should consider your financial situation. While calculating repayment capacity you should include your monthly expenses. Other than that, saving is also important. So, do not apply for a bigger loan amount than you can repay.
Without insurance cover
Taking a proper insurance cover is crucial for every home loan borrower. It will protect his/her family from financial distress. In case of any unforeseen situation, the home loan insurance can help the family to clear their dues.