If you are availing a home loan, you should take your time to know and understand what the loan would encompass of. Before you avail a home loan or are about to get the same sanctioned, here is a list of few terminologies that you need to keep in mind and how they affect your life:
Sanctioned loan amount
This is the home loan amount the lender agrees to pay you based on your application. Every lender, including Tata Capital, will start by considering your income sources, type of employment, age, place of residence, etc. before deciding the sanction amount. If you tick all the boxes, they will grant you a sanction letter stating the loan amount, interest rate, tenure, etc. You can choose not to borrow the entire sanctioned amount. However, you cannot borrow more than what is sanctioned to you.
It the percentage of the loan amount that you owe the lender for lending money to you. The home loan interest rate depends on the policy rate prescribed by RBI. Lenders usually charge interest rates that are a few basis points above the policy rate. The rate could also depend on other factors such as your credit score, down payment, type of interest and so on. As the name suggests, fixed interest rates remain fixed. Floating interest rates, on the other hand, keep changing throughout the tenure.
The tenure is the time period within which you have to repay the home loanamount. A typical home loan tenure can range from 5 to 30 years. Remember, longer tenures can mean higher interest rates. But shorter tenures can mean higher EMIs.
Equated monthly instalment (EMI)
EMI is the fixed amount that you have pay every month towards your home loan. EMI is calculated after considering the principal as well as the interest. Factors such as the home loan amount, interest rate and tenure determine the EMI amount. That said, you can choose your EMI as per your affordability. AT Tata Capital you can choose your EMI schedule wherein you can take a step-up or step-down EMI plan depending on your financial conditions.
Home loan eligibility refers to the set of conditions that you must fulfil to be able to avail the home loan. Your eligibility can depend on your age, income, occupation and so on. For instance, if you are between the age of 24 and 65 years and you have a self-employment experience of three years, then you fulfill Tata Capital’s home loan eligibility conditions. On the other hand, if you are a salaried individual, then you need to have worked for a minimum of two years. Also, your monthly salary should be Rs 30,000 or more.
A higher margin can be worrisome. After all, it is the percentage of the cost of your dream house that is not covered by your home loan. Usually, you can avail a loan for up to 80% of the value of the property. You must arrange for the remaining funds. The uncovered percentage (20 or more) is known as the margin. Remember, your loan is secured against the entire property even though you partly pay for the house from your own pocket.
This is perhaps the most important part of the home loan process. For your lender to trust you with his money, you must submit certain proofs. It is only after verifying your documents, your loan will be sanctioned. These documents include income proof, trade registration, salary certificate, identity proof, Income Tax Returns (ITRs) for the last two years, bank statements for the last six months, credit score report, etc.
A credit score issued by a credit bureau serves as an independent means of verifying your creditworthiness. The credit bureau arrives at your credit score based on the information furnished by lenders who have offered loans to you. If you have a good repayment record, your credit score will be well over 750. When you have a good score, lenders are assured about the repayment. Your borrowing process becomes faster. You must, thus, strive to maintain a good credit score.
Home loan EMI calculator
The most important aspect of a home loan is the repayment. You must arrive at an affordable EMI amount to repay your loan with ease. You may want to thank technology for this. After all, they provide you with online calculators. The home loan EMI calculator allows you to arrive at a suitable EMI amount within a few clicks. All you have to do is enter your home loan amount, interest and tenure.
Fees and charges
You must note that your home loan is accompanied by quite a few charges and fees. These are usually charged as a percentage of your loan amount and can range between 0.5 to 1%. Check home loan interest rates by visiting our website. While ignorance is dangerous, half knowledge is no better. Now that you know about the most commonly used home loan terminologies, you can now begin with your Home Loan procedure.