7 Important Things You Should Know Before Availing Home Renovation Loan

"Home Sweet Home" is a well-known phrase where you make your memories for a lifetime and nurture your family. This is an asset that adds to your net worth as well as offers you security. Applying for a home loan can seem challenging. This might be a tedious task depending upon many factors. Since properties' prices are skyrocketing with time, it will be challenging to acquire a home with your saving alone. So you need to apply for the home loan by keeping in mind the following essential things-

1. Eligibility Criteria-

There are different eligibility criteria for each lender. This shall be listed as below-

• A great Resident Indian

• The age of salaried employees be between 23 and 62 years, and that of self-employed should be between 25 and 70 years.

• The salaried applicants should hold a work experience of 3 years; a self-employed applicant should be a minimum business continuity period of 5 years.

• Besides this, you are required to disclose that you have sufficient income to repay the loan amount. One of the ways to calculate your loan eligibility is through calculating the EMI. 

Banks usually lower the instalments by 40%-50% in the case of more dependants in the family. The eligibility criteria for the repayment of a loan also depends upon your age. 

2. Loan type with interest rates-

There are two types of interest rates based on home loans: fixed and floating interest rates. In the fixed-rate, the interest rate does not change despite fluctuations in the market. On the other hand, the floating interest rate is the rate that changes with the variations in the market.

3. Home Loan, a Legal Document

A home loan is a government legal document that contains the terms and conditions of the loan. You need to make sure that you go through the whole form properly before signing it. The clauses mentioned in the form focuses upon the rights of the lender. They hold the right to change the interest rate by converting a fixed rate to a floating rate.

Besides this, be careful of the penalties and add-on charges as it is not just about paying the interest but also on expenses such as administrative and service charges. Make sure to keep this point in mind before comparing the deals offered by various lenders.

4. Negotiation of the rates

Being a loyal customer to your bank with a good credit history, you can negotiate your bank's interest rates. Though the bank holds the first right, you can negotiate it. With a good credit history, you can deal with the bank regarding the loan and interest rates. A good credit score gives you the power to do this bargaining. So if you are looking to purchase the loan, you should do it at the end of the month. Every bank has its monthly target, making it more comfortable and convenient for them to sanction the loan to you without losing onto their business.

5. Increase in EMIs

The calculation of your EMI depends on your loan amount, interest rate as well as tenure. The longer the tenure, the costlier, will be your loan. With the increase in interest rates, there will be an increase in your home loan costs and EMI's. This affects your home renovation loan. The interest adding on every month, along with the longer tenure, will ultimately lead to an increase in your EMI's. So, before applying for a home loan, make sure to choose a tenor in which you can quickly repay your loan amount without affecting your financial goals.

6. Switch lenders

If you have been taking a bank loan, then this does not mean that you are stuck with this only. In case of extreme situations or getting some better deal, you may switch it to a lender. You can negotiate quickly with the lender too.

7. Fine print

Sometimes, the loan agreements provided by the banks comes with some terms which might confuse you. It helps to be careful before going for it. For instance, the word "default" in the agreement does not always mean that it's there if you do not pay the EMI. But according to banks, this means when the borrower expires, gets a divorce, etc.

Now you know the essential things to consider before availing of your housing loan in India, make sure to be careful throughout the process to get one step closer to your dream home.