1. The
bank is not concerned with the Employment Status of the borrower
The ability
and the willingness to pay back the loan are two cornerstones on the basis of
which banks give the borrower the loan. While the income documents and account
of assets and liabilities give a fair idea of a borrower’s willingness. The
individual’s past track record is checked for the willingness and capabilities
for reduced delinquency to pay.
Thus
irrespective of the value of the property it is integral for person to submit
the required details for the bank to grant the loan. The home loan agreement
states that the borrower has to keep the bank informed about his employment
status i.e. whether he has changed his job or lost his job or retirement etc.
2. Higher
EMI is better than longer Tenure or vice versa
This
question always gives you a tough time. Ideally one should go for a higher
EMI, at first it might cause a dent to the borrower’s pocket but it would
benefit you in the longer term. This is because most home loan borrowers are in
their 30’s when they apply for loans, and if the loan tenure is of about 30
years or more then the borrower will be paying off his loan even after his
retirement, this obligation would then be difficult to fulfill when he will
have no source of income.
3. Hike
in interest rate means inflated EMIs
Do not freak
out when you listen to something like this. Most banks, subject to conditions,
usually extend the tenure of the loan and keep the EMI amount unchanged. This
decision is taken by banks on various factors such as a borrower’s property,
income and so on. It completely depends on t a borrower if he/she does not wish
to prolong their loan repayment they can inform the bank about their
willingness to service a higher EMI.
4. Fixed
Rate of interest is better or Floating Rate of Interest
Fixed Rate of
Interest: The interest rate charged on the loan remains fixed irrespective of
the interest rate trends. The EMI on your loan amount will remain the same for
the entire term. Floating Rate of Interest: The interest rate on your loan will
vary according to the interest rate prevailing in the market. Whether the
either is better or not for you entirely depends on the market scenario. If the
interest rates are expected to fall then fixed rate of interest will not be
good but at that time floating rate of interest would be favorable, as that
would lower your EMI. On the other hand if the interest rates are rising then
the fixed rate of interest would be better than the floating rate as the EMI on
the latter will increase in this case.
5. Prepayment
attracts Penalty
This factor
again depends upon the bank. Usually prepayment charges are levied in the
initial 2-3 years from the disbursement date of the loan and which declines
over time. If you repay the loan out of your own funds, you will not lose much.
This does not apply if you opt to refinance your loan from any other bank; most
of the financial institutions do waive the prepayment penalty. Mostly
institutions allow up to 25% of the loan outstanding to be part prepaid in a
financial year, but they can charge anything ranging from 2% to 4% for any
amounts paid over the specified limit of 25%.
