Home loans are formed to make the procedure of purchasing a home simple and convenient. With the assistance of a home loan, you can easily buy your dream home with zero need to pay the whole amount in a single go. You can fund your home and make repayment of the same in monthly installments. Moreover, home loans like Navi home loan or Canfin home loan come with a lower rate of interest and easy eligibility criteria.
However, before you begin looking out for a suitable home loan in the market, it is necessary that you understand the basics linked to a home loan. This will assist you in making an informed decision with a clear mind. Listed below are a few of the common home loan terms explained, which can assist you in knowing about the home loan basics –
EMIs (equated monthly installments)
EMI refers to an inarguably most common term in the home loan scape. EMIs mean equated monthly installments. It is the amount that an applicant must pay to the lender each month to repay his home loan. Home loan EMI is computed based on the loan amount, repayment tenure and interest rate. You can use the online home loan EMI calculator to figure out the home loan EMIs.
Down payment or margin is the major key term in a home loan agreement. Crucially, it is the difference between the loan amount processed by the bank lender and the actual property value purchased. In many cases, lenders process up to 80 per cent of the home or property’s value, and the borrower requires paying the rest 20 per cent in the form of a down payment or margin.
Before approving the application for a home loan, lenders tend to review your repayment potential based on various parameters. These involve the borrower’s monthly income, expenditures, age, personal assets, any existing debts/liabilities etc. This procedure, through which the lender reviews the borrower’s credibility, is called credit appraisal.
The procedure of releasing the loan proceeds by the financial institution to the borrower is called loan disbursement. The lender processes your loan just after getting the valid documents from borrowers and reviewing your credibility. Loan disbursement may be of 3 kinds – advance disbursement, full disbursement, and partial disbursement.
Before approving a home loan request, financial institutions tend to conduct a sanity review on the property. Few builders get the sanity review done through lenders beforehand to get the tag of being a pre-approved property. By selecting a pre-approved property, you can get your loan sanctioned in a hassle-free and quick manner.
Floating And Fixed Interest Rate
The home loan interest rate is one of the major home loan factors you must consider before you apply for a home loan with your lender. Fixed interest rate means that your rate of interest is charged on your home loan and will be the same across tenure. While in the case of floating rate home loans, the interest rate imposed by lenders usually changes periodically.
Post Dated Cheques
Many financial lending institutes ask for the post-dated EMI cheques from the home loan applicant before processing the home loan proceed. As suggested by the name, post-dated cheques are the cheques issued for future dates. These issued cheques may be encashed just on or after the date stated on the cheque and not earlier.
It is a common term used in home loans, which is used when the buyer is purchasing the property from another property owner. These kinds of properties are called resale properties. For such properties, transactions include numerous paperwork because the seller requires transferring the ownership of the property to the home buyer.
Pre-closure Or Foreclosure
Pre-closure or foreclosure of the loan is the condition wherein the borrower is looking to close the loan account by prepaying the whole loan amount before the repayment tenure. It is generally done when the borrower has adequate funds in their hands to repay the loan proceeds. Lenders might incur a nominal fee called foreclosure fees.
Security or Collateral
Collateral is the asset pledged as collateral or security by the loan borrower for availing the loan. If in case the borrower misses out on repaying the loan, the lender uses this asset form to recover the loan proceed. In the case of a home loan, property for which the home loan is disbursed usually is kept as security or collateral. This endows lenders the legal right to sell the mortgaged property if the borrower defaults.
In India, being settled is synonymous with having a home. In the present busy day scenario, everyone dreams of having their own perfect abode where one can find complete solace towards the end of the day. With this purchasing, a home is even a Herculean task nowadays due to the mounting real estate costs. A home is a simple way to finance your home purchase, given that it isn’t a wise decision to burn your whole savings to purchase a home or land.
Banks and other HFCs provide distinct kinds of home loans nowadays. Demand for a home loan has enhanced manifold in current years, and individuals have distinct expectations when it comes to a home loan. To meet the requirements of distinct sections of people, various banks have come up with the concept of different home loan schemes. To name a few, various banks provide particularly designed home loans for agriculturalists and women and loans to exclusively buy land. Lenders provide a home loan, not just for purchasing a home but even for various other reasons. A few of the popular kinds of home loans include – loans for buying land, loans for home purchase, loans for home construction, home expansion or construction loans etc.
Now that you are completely familiar with such home loan terms, you will be better equipped to search for the best home loan provider for funding your home. You can approach any financial lending marketplace to strike a comparison amongst different lenders and to choose the correct one as per your preference and suitability.