A house is bought using a home loan, with a certain portion being financed out of own resources of the borrower. There are a number of banks and housing finance companies in the market offering various products. It is advisable for a borrower to note down his concerns and then compare these across the board before taking a final decision on whom to borrow from and how much to borrow.
As a preliminary step, one may prepare a checklist covering these areas. Other areas of concerns may also be added. While discussing with the prospective lenders, this checklist will come in handy to make a good comparison and take a final decision.
Points for your checklist:
Purposes for which the loan is available – purchase of plot, construction, or for both
How and when the disbursement will take place Documents needed
Who can be co-applicant
What is the time taken or sanction, disbursement of loan. Generally, a bank takes 10-15 working days
Maximum loan the bank is ready to disburse
How and when the recovery through EMIs starts
In case of change in interest rate, how an adjustment in EMI will be made for interest reduction or early principal repayment
Method of calculating interest rate – daily or monthly reducing
Is a guarantor required? If yes, who can be a guarantor and documents required from him
Will the loan disbursement be made in phases depending on progress of construction or in one lump sum
Legal verification fee payable
Rate of interest and effective rate of interest. Effective rate of interest should be taken for a comparison
Commitment charges payable Processing charges payable
Procedure for switch over from floating to fixed rate or vice versa. The attendant conditions applicable and corresponding charges payable
In case of purchase of land and construction loan, will the bank sanction separate loans or a composite loan
Calculate Home Loan Emi Amount of EMI
Mode of payment of EMIs
Free or concessional insurance on the loan offered
Prepayment terms these questions constitute a preliminary checklist only. This list is not exhaustive. One may add any number of additional points. This will help in comparing and negotiating with the banks to get a good deal.