- 4 Tips To Choose The Best Bank For Home LoansJuly 28, 2017
Financing your dream home is one of the toughest tasks that you will face as you start materializing the project. Arranging for the funds to purchase the home is extremely important especially when you are a first home buyer and is in your youth. This is because houses are going to consume an enormous chunk of your savings and its liability would last up to many years depending on your expense. Home loans from various banks are the most common way of arranging funds for any big purchase.
The following are 4 tips to help you choose the best bank to facilitate home loans.
1. Understand the pros and cons of fixed and floating rates
Bank loans are available at both fixed and floating rates. Fixed rate home loans have a permanent interest rate over the entire tenure of the repayment of loan, while the interest rates of the floating rate home loans changes with market conditions. Fixed rates are good in the sense that you are certain about your repayment schedule. The weakness of this method is that, someday when the interest rates are cut down in response to the market conditions, you cannot avail its benefit. Floating rate home loans are tied to a base rate and then a floating rate. The rates vary according to the market conditions, sometimes they go up and sometimes they come down as we proceed along different business cycles. It’s a bit risky, but you can have significant benefits in the long run.
2. Your bank may not tell you everything
Home loans are not just about the principle amount and its interest rate, there are a lot of other charges that the sales personnel might not bring into your notice. Processing fees, Mortgage Deed Fee (MOD), Prepayment penalty, Commitment fee, Legal fee are means of levying heavy charges on the loan you take. Enquire about each of these fees to your sales personnel or the senior officials of the bank to avoid sudden disappointments.
3. Turnaround time
Different banks take different lengths to sanction and disburse the loans. Sanctioning of the loan should ideally happen within 5-10 days of the application, if you have provided all necessary documents. The sooner you get, the better; however if the bank provides you the loan very easily with little time to verify the documents and the project under planning, you need to be a bit careful as credible banks follow proper procedures to sanction loan which might take time. Disbursement of loan is either done in instalments based on the progress of the construction or in full amount. Even after lending money, banks do post- disbursement services like giving regular account statements and interest certificates every year. Make sure that you your bank correctly do all these before taking the decision to avail loan from it.
4. Repayment Terms
Banks have different norms relating to the repayment of the loans. Before you avail the loan, get maximum clarity regarding the terms related to pre- payment of loans (especially for fixed rate loans), transferring the balance to another lender’s account, redraw facilities, repayment holidays etc. A good knowledge about these factors will help compare and analyse different loans and take a wise decision.
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