Home Loan: Is EMI putting a strain on your pocket? Avoid these ‘mistakes’ before buying a home, otherwise you will face a big financial blow

• Is EMI putting a strain on your pocket?
• Avoid these mistakes before buying a home
• Otherwise, there will be a big financial hit

Home loan is a big financial responsibility. Even a small mistake made during this process can significantly increase the total cost of the loan over time. Due to haste or incomplete information about buying a dream home, people often make mistakes that can cost them in the form of higher monthly installments (EMIs) and additional expenses over their lifetime. Know what precautions to take while buying a home on EMI.

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Do you choose a bank just by looking at the interest rate?

Most people choose a home loan only on the basis of the lowest interest rate, but this is not right. For example, a bank offers a low interest rate of 0.25 percent, but if its processing fee is higher by Rs 25,000 to 40,000, then all the benefits of the low interest rate are lost. So, always compare the total cost, which includes interest, processing fees, legal fees and insurance premiums.

Choose a longer tenure to keep the EMI low

The longer the loan repayment period, the lower your monthly installment (EMI), but the higher the total interest burden. For example, if you extend the tenure of a loan of Rs 45 lakh at 8.5% interest from 15 years to 20 years, the installment will reduce by approximately Rs 5,200, but you will pay approximately Rs 14 lakh more in total interest. Use a home loan EMI calculator and try to choose a tenure that will not burn your pocket and save on interest as well.

Check your loan eligibility before looking for a home

Many buyers determine the property first and apply for a loan after the price is determined. If the bank approves a lower loan amount than expected, the buyer may face financial pressure or even cancel the transaction. So, before starting your home search, use a home loan eligibility calculator to determine how much loan you can get based on your income.

Check RERA registration

Banks inspect properties only to reduce their risk (quality of ownership and construction). Many buyers think that once the bank gives the loan, the property is fully secured, which is wrong. Issues such as legal disputes, ownership history or unauthorized construction may arise later. Get an independent legal verification of ownership of the property and ensure that the project under construction is RERA registered.

Apart from the down payment, preparation for other expenses

A down payment isn’t the only major expense when buying a home. Four to eight percent of the property value goes towards stamp duty and registration. This amount has to be paid in cash. If you are buying a house worth Rs 70 lakh, stamp duty alone may cost Rs 3.5 to 5.5 lakh. Additionally, budget an additional Rs 4 to 7 lakh for processing fees, GST, legal verification and interior decoration expenses.

What to choose between fixed and floating rate?

Before signing a loan agreement, it is important to understand the difference between fixed and floating interest rates. Fixed rate installments (EMI) remain the same throughout the tenure, while floating rate installments fluctuate depending on market conditions. Also, don’t ignore the loan even after getting it. After two years, if your credit score has improved, request an interest rate reduction from your bank, and if you received a bonus or additional funds, partially repay the loan.

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