Figuring out the right Home Loan

Once you have decided your funds and saved up enough for the down payment, you need to find the right lender for the home loan. You must find one with a good reputation for customer service and faster approvals. For the first time buyers there are multiple questions- how much time it would take or what are the eligibility criteria for the home loan etc- so choose a lender who can give satisfactory answers.

After your questions are answered, it's time to choose a home loan. A home loan can be of two types- 1. Fixed rate home loan & 2. Floating rate home loan. In the fixed rate, the rate of interests are fixed with fixed EMIs and they do not change over the tenure. The other option is to go for the floating or variable rate where it changes according to the market trends.

Fixed rates allow you to make a good financial plan for the future. Floating rates might be a good option if you don’t plan on living in your home than your original fixed period. However, considering the sentimental value of owning a home no one would like to leave sooner than planned.

As for the tenure of the repayment of your loan, 30 years is preferred over 15 years even if you think you can repay the loan faster. The next step should be to build a passive income source like to invest in mutual funds, FDs or RDs. However, it should be done in such a way that you do not stretch your finances too thin. The most adverse time is when the market declines so in order to survive you must try to expedite your repayments as if you have a 15-year tenure in spite of having 30 years. Later you may choose to lower your EMIs which can be a good option.

Lenders might approve a bigger loan that might be more than what you determined you can afford. So don’t step in the trap and keep your focus on your budget.