4 Home Loan Agreement Clauses you should definitely know
Knowing your Home Loan agreement and all the little clauses involved in it can go a long way in making the process of obtaining said loan smoother and hassle-free for you. It is imperative that you stay cautious and question each article and clause that you are unable to comprehend.
The Home Loan agreement is a massive document detailing all the different aspects of the agreement between a lender and a borrower like interest rate, repayment strategy, loan tenure, etc. Most people just brush past it without giving it a second thought, which is an incorrect approach. As a borrower, especially if it’s your first time applying for a Home Loan, you need to prick your eyebrows and go through the entire agreement with complete concentration.
Financiers like Bajaj Finserv offer Home Loans with benefits such as quick online approval, part prepayment facility and much more.
Four Home Loan Clauses in India You Should Definitely Look Out for
Reset Clause on Fixed Rates
If you opt for a fixed loan, the interest rate remains constant throughout the loan tenure. But certain banks add a clause where they retain the right to change the interest rates depending on the market trends. The bank has the legal right to review rates at the end of certain number of year and make the changes they deem necessary. This essentially transforms your fixed loan to a floating interest loan. You need to go through each clause of the agreement carefully to figure out if the bank has tried to sneak in a Home Loan reset clause.
read more about Fixed or Floating Interest Rate: Which is ideal for Home Loan
There are certain loan agreements where the lenders add a clause that asks the borrowers to notify the lending institution of any changes in his personal status such as employment or marriage well in advance. Since the financiers don’t define the exact period for ‘well in advance’, it can lead to confusion and ambiguity. The lender can take advantage of this fact and declare the non-disclosure as a default. If you come across such a clause in the agreement, have a talk with the lender and ask him to clearly define the period within which you are supposed to notify any change in the personal status.
Prepayment is always a tricky issue in the Home Loan agreement since the lender is losing out on interest payments. Most financiers charge a penalty to compensate for the loss, but might not be upfront about it. Check the entire agreement for any mention of a Home Loan prepayment clause and discuss it with the lender. Non-banking financial companies like Bajaj Finserv offer Home Loans with part prepayment facility, allowing you to finish off the loan quickly.
Security Cover Clause
This clause allows the financiers to demand additional security when the property prices fall. Even if you are loyal on your EMI payments, this clause will force you to pay a security cover in addition to your loan amount and if a person fails to provide such a security then they may be declared a defaulter by the lender.These are some of the important Home Loan finance clause that you must watch out for in your loan agreement. Opt for the services of financial corporations like Bajaj Finserv that offer a relatively hassle-free experience and provide benefits like nil foreclosure charges and refinancing facility.