Housing financecan be crucial in transforming your dream home into a reality. But if you’re new in the market and a first-time borrower, it can be challenging to navigate around the glossary associated with such a loan. So, we’ve got you covered!
Here are some of the most important home loan termsyou should know before venturing into the loan market.
EMI stands for Equated Monthly Instalments and is a fixed amount paid by the borrower on a fixed date of every month. It comprises both the principal and interest components of the loan. These monthly instalments are essentially how you repay the borrowed amount.
Moreover, EMI is pre-calculated based on the factors such as loan amount, tenure, and home loan interest rates, and the borrower is informed of this at the time of loan disbursal.
2. Down payment
When a lender approves your application, they only sanction 70-80% of the actual property value as the loan. However, the borrower is expected to arrange the remainder of the cost. This amount paid upfront by the borrowers from their own pockets is called down payment or margin.
In the case of home loans,lenders usually require some form of security that can guarantee repayment capacity. This is called collateral or security. Normally, the house for which the borrower is availing the loan is offered up as collateral to lenders. And it is after you close off the loan that you gain full ownership of the property.
Additional Read: What Is the Role of CIBIL Score in Getting a Home Loan?
Tenure is the specific amount of time lenders provide to the borrower for repaying the loan amount with interest. The maximum term for home loanscan go up to 30 years!
Loan disbursement is when the agreed-upon loan amount is transferred to the borrower’s account and is ready for use. This is only done once all the document verifications, and legal formalities are done.
In case you’ve taken a loan for property construction, disbursement is usually of three types –
- Advance – The entire loan amount is disbursed before the construction of the property.
- Partial – The loan amount is disbursed in parts. One part is disbursed before the construction of the property, and the remainder is disbursed post-completion of construction.
- Full – The entire loan amount is disbursed after the construction of the property.
6. Offer letter
Also known as a sanction letter, an offer letter from the lender is a formal confirmation that your loan is approved. It is valid for six months, within which you must complete all your loan-related formalities.
Additional Read: What Are the Benefits of Pre Approved Home Loans?
To sum up
Now that you are familiar with most of the home loan terms, the next logical step is to choose a trustworthy lender. Why choose Tata Capital? Because we offer tailor-made loan plans at competitive interest rates and follow a completely digital application process.
So if you want to own the home of your dreams, visit Tata Capital’s website and avail of housing finance in a matter of few clicks!