Getting Your Timing Right With Home Loans
Owning a house gives an individual a sense of independence and achievement. Whether your dream is to construct a house on a plot with a garden or to redecorate your cozy apartment overlooking the ocean, you require the right amount of funding. Obtaining the right kind of loan is a process that requires you to do your research well and make the right choices along the way. A Home Loan must fit your budget, your ability to repay and your preferred timeline.
The various types of loans available are home purchase loans, land purchase loans and home construction loans. There are various types of Home Loan interest rates available as well such as a floating interest rate and a fixed interest rate. In a floating interest rate, the interest rate changes with market fluctuations. And a fixed interest rate remains the same over the course of the loan.
A key deciding factor while taking a Home Loan is the tenure i.e. the duration of the loan so that it is easy for you to make your payments and be in good graces of the lender. While refinancing your loans at a later stage, or foreclosing your Home Loans are options available to you as well, the tenure is critical in deciding the length of your financial responsibility. Let us look into a few key areas while deciding whether you want a 5, 10, 15, or a maximum Home Loan tenure such as a 25 year Home Loan.
Key Factors While Choosing Home Loan Tenure
Your Age Factor:
Age is a very important factor while deciding on a Home Loan because your loan tenure is directly proportional to your earning years. Some lenders have withdrawn the option of loan payment post retirement. So make sure that your age criteria is covered. In some cases, you can allot a younger applicant to continue paying your loan after retirement.
Your income dictates your ability to pay back the loan. This directly affects the term and longevity of your Home Loan. To get the best Home Loan tenure, be mindful of the amount you are borrowing keeping your income in mind. Sometimes, individuals take a higher EMI but a shorter term loan. Considering a large chunk of your EMI will be deducted straight from your salary, this could be a risk factor for some. Do keep in mind the number of years you may require to safely pay off a loan while also maintaining a safety net in place for unexpected expenses such as a medical situation or a wedding in the family.
The Reason Behind Your Loan Application:
There could be many reasons as to why you are thinking of obtaining a Home Loan. For investors, a short term loan is less expensive and long term loan becomes draining on the pocket. If your aim in buying a house is to sell it for a profit, then opting for a minimum Home Loan tenure will provide a better return on investment compared to a longer loan term.
In order to ensure you are getting a good loan, ensure you follow these rules as these factors decide the tenure of your Home Loan which will directly affect your finances:
Ensure You have Flexible Options of Repayment:
You never know when you might face a financial crisis.
Ensure that the Interest Rates are not Very High:
Always compare the rates of different banks and opt for an interest rate that suits your convenience. Try to avail a good interest rate that may reduce your EMI and loan tenure.
Earnings Determine the Type of Interest Rate:
Always choose between fixed and floating interest rates according to your earning.
Think of Including a Co-Signer:
Sometimes it is good to allot a co-applicant who can continue paying the loan after you, just in case you run out of money.
Loan Type Based on Your Purpose of Purchase:
There are certain loans that offer money for the improvement of your house like interior designing, reconstruction, and renovation. In such cases one should opt for loans specific to these purposes only.
While deciding on how to reduce your Home Loan tenure, ensure you review the final draft of a legal document as it can be incomprehensible. It is better if one discusses each point (including the tenure) with a loan expert from the lending institution in order to understand each and every clause.
These are the key points that you should remember while deciding on a Home Loan tenure. Taking all these into consideration along with aiming for the best possible tenure of your Home Loan, you are sure to get a good deal.