Buying a home is one of the biggest decisions of your life. You decide to take up a home loan to buy your home. Moreover, since home loan interest rates are much lower right now, the house you want to buy may be well within your reach. But before you take the home loan, be careful of the lender you choose. Not all financers will be an ideal match for your needs. As a wise borrower, you should be careful of the home loan financer you choose.
Here are some of the instances you should be wary of when choosing a home loan financer:
- High interest rates: Ideally, you should opt for a financer that offers a low home loan interest rate. Avoid a lender who charges a high interest rate even when the market home loan interest rates are low. Be aware of the different types of home loan interest rates– floating and fixed. In floating, home loan interest rates change with time. This is beneficial because interest rates will likely fall in the future. In fixed interest, your home loan interest rate remains the same for the entire tenure. Use a home loan EMI calculator to know the interest rate implications. Avoid a financer who gives loans only at a fixed interest rate.
- High loan processing fees and other charges:Processing fees is a charge that you have to pay to your home loan financer once your home loan application is accepted. Generally, lenders charge up to 1% of the home loan amount sanctioned as processing fees. So, when getting a home loan from a financer, check the processing fee. If the processing fee is higher than 1%, it is best to avoid seeking a home loan from such a financer, even if it comes at a low home interest rate.
- Heavy documentation and long disbursement period:Given that everything is available at the click of a button, your home loan process should also be swift. A financer that requires you to fill in meaningless paperwork, and has a cumbersome home loan approval process, is not the one you should engage. Moreover, stay away from a financer that takes longer than 10-15 days to disburse your home loan amount.
- A pre-payment penalty: As per the RBI guidelines, banks and financial institutions cannot levy a pre-payment penalty. You can pay off your home loan whenever you have surplus cash without a penalty. Some financers levy a foreclosure payment penalty for repaying home loans before the home loan tenure ends. That said, a bank or financial institution that levies a pre-payment penalty should be avoided when you’re taking on a home loan.
- Inattentive customer service:Avoid a financer that takes too long to process a home loan or redress grievances. A financer that does not offer support in the home loan application, approval and disbursement process is not ideal. You should engage with a financer that provides attentive customer support. Also, a financer that offers technologically advanced services like an app, integrated payment, etc., is a good choice.
Overall, by analyzing a home loan financer based on these factors, you can be sure to find the right home loan product and the right lender, enabling you to buy the home you desire without being financially burdened.
Raj Kumar is a qualified business/finance writer expert in investment, debt, credit cards, Passive income, financial updates. He advises in his blog finance clap.