1. Fixed or floating?
Though many banks have discontinued the practice of providing home loans with fixed rates, there are still some of them who provide such loans. There are many loans seekers as well who want to go for suchloans with fixed rates to avoid the stress involved. Presently the interest rates are in a back seat, so it’s best to opt for floating rate loans. Apart from this, the differential between the floating and fixed rates in 2 percentage points, which primarily depends upon the lender. Thus it is best to choose the former.
2. Don’t focus on the rates alone
An appropriate lending rate is a prime factor for choosing a lender, but the lender who offers you the lowest lending rate, necessarily need not be the ideal option. For example, in the whole process of the lender’s evaluation of your eligibility, your requirements fall back seat, then his lower lending rates will not mean much to you. Apart from this, there are other factors as well, like charges of processing fees, inspection and valuation charges, which will not be mentioned to you during the lower lending rates, but will later enhance your rate indirectly, which will not be of much help.
3. Insure your property
Loaners are required to insure their mortgaged house against fire and other natural calamities but very few borrowers take this clause seriously, which could be a costly mistake. In such cases, the bank reserves the right to debit the borrower’s account to insure the house and charge interest for the same as well. But it is best if you insure your home, because in or any case you will be safe and left with a home loan despite the factor that you become deprived of a shelter.
4. Don’t hesitate to switch
The existing borrowers, who think their banks are stubborn in respect of revising their lending rates, should keep this suggestion in mind. Now it more authentic and easier for a borrower to negotiate as the RBI has abolished pre-payment penalty. You should definitely have a word with your bank if it is unwilling to reduce rate despite the fact that other banks are doing so. Along with this, you should also show your intention to switch to other lenders, which can prove to be a powerful tool for you. But if you intend to do so, then just make sure that the savings on the payable interest justifies the cost involved in your switching banks.
5. Keep communicating with your bank
The approval of your loan depends on your present financial situation. So, if there is even a slight change in your relevant circumstances especially in your employment status, the banks are keenly interested in being informed. So whatever it is – your job loss, retirement or switch – ensure that your bank is aware of it and let them not find any loophole to blame you. Have scheduled negotiations and keep them informed.