The most common mistake most people make is to opt for the longest credit term in order to maximize loan eligibility and minimize EMI. Before you join the millions of bank credit customers in India who make this mistake, just understand what it costs. For a loan of 40 Lakhs at 6.75% for 15 years, the EMI is 35,396 / – and the total interest you pay to the bank for 15 years is 23.71,348 / If you opt for a loan term of 20 years instead of 15 years, for the same loan amount and at the same interest rate, the EMI is 14% lower with 30,415 / – but over 20 years you pay 32,99,494 / – in interest, which is ₹ 39% higher than for a 15-year loan. Lenders often contain clauses that may require you to provide additional collateral if your home, which is used as collateral, loses value over the life of the housing construction loan. Be vigilant to protect yourself from these kinds of clauses before signing the home credit agreement. It is important to select a bank that will allow you to pay your credit in advance without fees or problems. According to the RBI circulars, banks cannot collect advance compensation or fees for loans for the construction of variable-rate housing. However, banks may impose a penalty for prepayment of fixed-rate loans. Fees can vary from 1% to 3% of the loan amount. So check this aspect carefully before selecting a bank and real estate loan. Another option is a smart loan or interest savings loan.
Do you normally keep a significant bank credit or do you sometimes have high bank accounts? You can consider Home Credit or Home Saver or Maxgain options that allow you to deposit your excess savings into a bank account and pay interest on home loans only on the net difference between the two. So you pay less interest on your home construction loan during the period that your excess cash will remain in the bank. A home loan is a secured loan in which the borrower must keep collateral with the lender. However, the guarantee in the case of the housing loan is the house itself for which the loan is loaned. In the event that a person does not repay the home loan on time, the lender has the right to acquire the property. Another catch for fixed-rate loans is „What`s the farm of what`s called the fixed rate?” A fixed interest rate is rarely fully fixed. Most banks offer a fixed interest rate for the initial period and then convert it into a variable interest rate. The fixed interest period can vary from 1 to 10 years, although the total term of the loan can last up to 30 years. Always check what the applicable interest rate is after the fixed rate period expires….