Very few people have the full amount to purchase the house they need. For most people, the normal course of action is to arrange for 15-20% as down payment and take a home loan for the rest of the amount. And it’s not difficult to get a home loan these days if you have a stable income and a good credit history. Check your home loan eligibility.
Also, given the fact that property prices have more or less stagnated and interest rates on loans are low too, it can be safely said that this is one of the best times to purchase a house.
If you haven’t taken a home loan before, then there are few terms that you should become familiar with. We discuss 4 important ones here
1. Credit Appraisal Process
Lenders are in the business of lending money. But they won’t lend if they are not sure of getting their money back with interest. Right? So this is what credit appraisal process is all about. They will check your financials like income, age, qualifications, nature of work and employer, tax history, existing loans, etc. to arrive at their decision about how much to lend, at what rate, for how long and with how much down payment.
2. Down Payment
You will never get 100% of the cost of the house as home loan. You need to bring in some money initially from your own pocket. This is known as the down payment. The amount varies from 20% to higher depending on various factors.
Of course you know that. Don’t you. EMI is a fixed monthly amount that you pay back to the lender every month. It consists of a part principal and a part interest. EMIs are calculated depending on the principal, repayment period and rate of interest on the loan.
Payment to builders of under construction houses are linked to construction, i.e. payment is made in parts as and when certain milestones are achieved in house construction. Now your regular EMIs will begin when the final disbursement is done. But until that time, you need to pay a Pre-EMI to the lender, i.e. only the interest on the disbursements made so far.