A blunder in the home loan procedure might result in higher interest rates and a terrible experience overall. Because of the massive amount, you will be borrowing to fund the home purchase, taking out a home loan is a major financial decision that should be carefully considered. As a result, in addition to conducting your own research on house loan alternatives and lenders, you should ask your lender a series of questions to ensure that everything fits into the scheme.
4 crucial questions to ask your lender
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Is the interest rate on a home loan fixed or floating?
Fixed and floating interest rates are the two types of home loan interest rate structures. The interest rate on a fixed interest rate mortgage remains constant throughout the loan term. In a floating interest rate structure, on the other hand, the interest rate changes over the course of the loan due to external factors such as the RBI’s monetary policy and changes in the lender’s internal policies.
You should inquire about the house loan interest rate structure and the elements used to generate home loan interest rates. The importance of each factor, such as CIBIL score, income status, work status, down payments, and so on. You can use a home loan calculator to calculate the monthly EMI.
- Do you allow home loan balance transfers? If so, how much does it cost for prepayment?
The practice of refinancing your outstanding home loan with another lender at a lower interest rate and more favorable terms is known as a balance transfer. Home loan balance transfers are normally permitted by lenders, but you must confirm this during the application process. You should also find out if there are any prepayment penalties associated with a balance transfer home loan.
Lenders cannot impose penalties on home loan prepayments on a floating interest rate structure, according to RBI guidelines. You must, however, confirm the prepayment charge on a home loan with a fixed interest rate structure.
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What is the home loan’s annual percentage rate (APR)?
The annual rate of interest on loans is frequently advertised or mentioned by lenders, however, it does not include any other costs related to the loan. A house loan typically includes a variety of expenses, such as processing fees, administrative fees, taxes, and other documentation charges. As a result, if you ask for the yearly percent rate, the lender will tell you the whole cost of the loan, including interest and other fees.
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Inquire about the disbursement and repayment of a home loan.
Before applying for a home loan, find out how the loan will be disbursed. Will the house loan money be instantly credited to the seller’s account or will it be credited to your bank account in the case of a property purchase? In the event of a house building loan, you should inquire about the targets and the proportion of the loan amount that will be disbursed once each target is met.
When it comes to repayments, you must first verify with the lender when they will begin and how they will be made. Whether it will be deducted straight from the bank account or if signed post-dated cheques tied to EMI dates will be required.
