Properties, Homes & more

Continued from Part 1…

There are many important points to be looked into before signing on the dotted line… In this 2-part series, I will cover 9 important points that must be carefully considered.

1. Look deep in your wallet before deciding the property
2. Look closely at your lifestyle and financial capabilities
3. Evaluate market conditions
4. Higher loan amount increase burden of debts

(Please refer Part 1 for discussion on these 4 points)

5. Increase the down payment When you go for home loan, you have to pay around 10% to 15% of the project cost and around 85% to 90% is funded by the bank or financial institution. If you have more than the required amount for ‘down payment’ then pay more, so that your required debt is reduced significantly.
6. Prepayment is the best way to save on interest Always make an effort not to extend a loan beyond its tenure. As and when you have excess cash, try to prepay (huge loan first). For example, you could prepay from your yearly bonuses or salary hikes. Prepaying can lower the tenure and help you save on interest. However, check with your bank from when you can start prepaying, as banks usually do not allow prepayment during the first year of the loan period. Also check if there is a prepayment penalty. The idea is to make sure that the interest saved does not exceed the prepayment fees.
7. It is not a family bank, unlike family doctor It is not essential to opt for the same bank that your brother took his home loan from. It is advised that you should do your own searching in terms of the deals offered by different banks. Moreover, your brother’s offer for the same loan amount and tenure could be (and mostly, would be) different from what is offered to you, as it varies according to the credit profile of the borrower.
8. Processing fee If you have nothing in writing from the bank, it is possible that you might lose the processing fee that you pay to bank in case the loan does not get approved. So, either you get something in writing from the bank or factor in all this money for these kinds of losses.
9. Read the home loan agreement (fine print) carefully Most of us just close our eyes and sign on the dotted line. What we forget to read are the clauses that are in fine print in the loan agreement. You need to understand the significance and impact of these various clauses before you sign the agreement. Important clauses to watch out for are: the Force Majeure clause and Reset Clause on Fixed Rates.

So you have finally decided to buy your own house… With this single decision follows a chain of other decisions, ranging from choosing the property, choosing a home loan offer to deciding the furniture for the new house. However, believe me this is not as simple as it sounds… There are many important points to be looked into before signing on the dotted line… In this 2-part series, I will cover 9 important points that must be carefully considered.

1. Look deep in your wallet before deciding the property Now that you have set your heart on a house that is perfect for you, have you carefully thought of whether your wallet will be able to handle the cost of your dream home? Going for a house that you can’t afford to pay for is like eating more food than you can digest. You end up with indigestion, and in this case the indigestion may cost you dearly!
2. Look closely at your lifestyle and financial capabilities Plan for an unfortunate eventuality like loss of job or illnesses and ensure that your wallet will be able to take the pinch for a few months at least. Pay attention to your other debt liabilities before going in for the home loan.
3. Evaluate market conditions Understand the real estate market and evaluate if the property prices are stable and not likely to fall further. Do your research on home loan interest rates, see if they are likely to decrease or increase in future depending on the existing market conditions, you may not want to lose out on a good deal because you jumped in too early.
4. Higher loan amount increase burden of debts Having high credit card outstanding and a number of other loans not only brings the eligibility for higher loan amount down, it also increases the burden of paying all of these debts off.

Concluded in Part 2.

Kotak Mahindra Bank joins rate war, offers 8.49% fixed rate for home loans. After banking biggies - SBI, ICICI and HDFC - it is now the turn of Kotak to announce its special home-loan scheme, offering an 8.49% fixed interest for first 30-months.

The special offer can be availed for all new loans irrespective of the loan amount, but will be limited till January 31, 2010, the bank said in a press release. The private sector lender will charge floating rates (prevailing at that time) on these loans after the 30-month period, which will be decided based on the retail prime lending rate, the bank said. While the fixed duration loan rate will remain the same irrespective of the loan amount, the floating rate will vary with the loan amount, the bank said.