Buying a home is an emotional decision, a place where you create memories that will stay with you for the rest of your life. But are we planning enough by borrowing a home loan? Are we sure the home loan system is the best in the business? Borrowing a home loan requires analysis and planning because it is a long term and expensive commitment.
Getting a loan without proper research can hurt your financial well-being. When applying for a home loan, people need to be extra vigilant so that they don’t end up with the wrong program or the wrong lender. Neeraj Dhawan, Managing Director of Experian India, shares his knowledge on what buyers should keep in mind in order to avoid mistakes when applying for a home loan.
“No Self-Assessment: The first mandatory step before applying for a loan is to have a good credit rating. A credit bureau like Experian provides you with free and unlimited credit reports, which is quite easy and convenient. to download. A credit score above 700 can lead you to a favorable plan. It will also give you the power to apply for a loan from the best banks. Lenders will assess creditworthiness; a bad credit / repayment history will lower the score and the borrower will not be eligible for good home loan programs. In India, only 7% of sanctioned home loans in the industry go to clients with an Experian score of 300-700, “Neeraj Dhawan advises.
“Lack of proper research: Home loans have become quite common and are readily available. With the growing demand, several financial institutions offer personalized programs to meet its needs. Hence, it is very important to do proper research before applying for a loan from an individual. Homebuyers should recheck their needs, plan their finances, check terms and conditions, identify hidden fees, processing fees, and flexible repayment options to name a few and, accordingly, select the bank. and the appropriate program. Nowadays, many websites allow you to compare mortgage products offered by different banks. Lack of research can cause you to pay unnecessary fees or a higher IME, ”he adds.
Further, Neeraj Dhawan suggests, “The shorter the tenure, the higher the risk. non-payment of the EMI given the high amount of the EMI. The eligible amount would depend on various factors such as age, credit history, and repayment capacity. Besides, you need a high credit score and a good repayment history to qualify for a higher amount and get favorable terms and conditions. A longer tenure will lighten your EMI and meet your financial goals.
Regarding mortgage repayment, Dhawan advises, “The biggest mistake people usually make is not including their monthly expenses when calculating their repayment capacity. The bank usually takes care of your debts when granting a loan. a home loan with a higher EMI amount, it can lead to a huge financial crisis. Your EMI output should generally not exceed 30-40% of your income. You should not depend on future events such as an increase in your income and instead consider your current financial situation before opting for a larger loan. In view of the current situation, it is always advisable to do a thorough study of your expenses before applying for a loan or choosing an expensive property.
Explaining the importance of insurance coverage in home loans, Dhawan says, “Mortgage borrowers should purchase appropriate insurance to protect their families from financial hardship. In the event of the unforeseen, mortgage insurance can help the family to pay the contributions. Several insurance products cover the mortgage, such as life coverage that includes your liabilities. Not securing your liabilities is a risk that most borrowers don’t recognize. It is strongly recommended that you take cover to protect your family members from any financial burden.