Home Loans

You always wanted to own a house, but could never cough up the necessary resources for the same! You do own a house, but you want to renovate it! Which ever may be your need, you have several players in the market place helping you realize this dream.

Here are a few tips.

1. Is Processing Fee refundable ?
   
   The processing fee involved for a housing loan generally varies from 0.5% to 1% depending on the Institution. It is advisable to enquire whether the fee is refundable or not, in case of loan, not being availed.

2. Check out for the flexibility of anytime-exit in the scheme :
   
   If the loan is going to be repaid early i.e., before completion of tenure, most institutions charge 2% of the amount as exit load for pre-payment of the loan. Ideally, one should look for zero percent exit load or foreclosure cost, so as to have the option of switching to another loan if the interest rates fall. HUDCO, for instance, does not charge any exit load/foreclosure cost.

3. Beware of hidden costs !!!!
   
   Another important factor to be considered is, whether the Principal repayment made every month included in EMI, is deducted from the Loan amount on a monthly basis or annual basis. Lot of Institutions consider the repayment of Principal at the end of the year, even though the EMI is collected on monthly basis. Hidden costs of almost 1% are included in the same.

4. Have your spouse as co-applicant :
   
   If the application for loan is made by having one's spouse as a co-applicant, the income of co-applicant is also considered while calculating the total amount of Loan. If the co-applicant is anyone other than spouse, then the income of co-applicant will not be considered. Therefore, it is always beneficial to have spouse as a co-applicant.

5. Choose a guarantor with a guaranteed life !!!
   
   The details of 2 guarantors should be submitted along with the proof of their income. The Institutions generally insist for Income tax assessees as Guarantors. Since repayment of a housing loan runs into ten or fifteen years, one should be careful while choosing the guarantor, i.e., he should not be over fifty years of age.

6. How much is the dent in the pocket going to be ?
   
   The overall cost of capital should be worked out after considering the Processing Fee and the repayment of principal on a monthly / annual basis. The internal rate of return (IRR) so calculated, should be used for deciding on the loan.

Do have a peep into these sites. May be your dream translates into reality !!

Personalfn.com

• This site allows you to apply online for home loans.

• It provides latest day -to- day news on housing loans.

• It has a help center, which consists of FAQs, Glossary, and Checklist.

• The site has special reports on the tax benefits that you stand to gain by going in for a house loan, and also has sections which enables you to understand the concept of home loans better.