4 Things to Know About Home Loan

Buying a home is a milestone if you are financially independent and plan to settle down in life. If you’re reading this blog, chances are high that you are planning to take the first step, i.e., securing a home loan to buy the house you always dreamt of getting.

If that’s true, and you’re doing it for the very first time, you have come to the right place. This blog will tell you everything you must know about a home loan.

Know about CIBIL Score

How would you know you’re eligible for a home loan? Loan approvals are not as easy as they seem to be. A lender will ask you relevant questions and will grant you a home loan if you answer them correctly. The first thing the lender will check is your credit score. 

Consider a credit score a numerical figure depicting your credit behaviour in the past. It includes the amount of credit you have availed and if you have repaid it on time. 

So, you must ensure that you have a credit score of 750 and above to increase your chances of loan approval. If you want to improve your credit score, always pay your bills on time and refrain from filing multiple loans in a short span. 

Floating and Fixed Interest Rates

When you’re availing any loan, you have to pay interest on it. You must know that banks and financial institutions give you two options – fixed interest rates and floating interest rates. Some banks even give you a combination of the two.

Fixed interest rates, as the name suggests, is the interest rate that doesn’t change for a specified term. A floating interest rate, on the other hand, keeps fluctuating as per the market condition.

One of the benefits of a fixed interest rate is that it offers you certainty and predictability. You can plan your finances accordingly. You may think that set interest rates would be cheaper, but this is only sometimes the case.

Fixed interests are usually higher than floating interest rates. As floating interest rates can decline over the years, it may also help you save money. 

Know about Margin Money

A lender doesn’t sanction a home loan that equals 100% of the cost of the house. There is some proportion you have to pay from your pocket. This is called margin money.

This percentage differs from lender to lender. In most cases, lenders agree to sanction up to 80% of the cost of the house. 

The margin money decides the amount you will be requiring as a home loan. You may also pay more than 20% as margin money if your financial condition allows. It will be a cheaper option in the long run. You must view and assess your financial information to calculate the amount you can comfortably pay as margin money. 

The Types of Home Loans

There is no one type of home loan, but several. These include a primary home loan, home construction loan, home improvement loan and home loan balance transfer. 

Basic Home Loan

As the name suggests, a primary home loan is the standard yet the most widely chosen type of home loan. It can be availed if you are planning to buy a new home. 

Home Construction Loan

This type of home loan may be chosen if you already own a plot and wish to construct a house on it. 

Home Improvement Loan

This type of home loan may be availed to fund renovations. For instance, if you already have a house but want to add a floor to it, this may be the ideal type of home loan you would like to avail. 

Home Loan Balance Transfer:

You don’t always have to have the same lender throughout the tenure of the home loan. You can switch to a different lender if they offer you a lower interest rate and extra benefits. 

Tata Capita: Loan Experts

Applying for a home loan may seem a daunting and complicated task to various individuals, especially if they are doing it for the very first time. However, once you acquaint yourself with the basic terminologies and the concepts mentioned above, you will begin to understand how a loan works in no time. If you’re looking for information on getting the best loan for your requirements, you can connect with Tata Capital. They are one of the best financial institutions offering great advice and loan services.