Before choosing a home loan, one needs to completely study it as it will help in getting the best financial deal
Shopping, comparing, seeking clarification and negotiating with banks may save you thousands of rupees.
Ask the bank about its current home loan interest rates and whether the rate is fixed or floating. Remember that when interest rates in the economy go up so does the floating rates and hence the monthly re-payment.
If the bank is offering a floating rate, know how your rate and loan payment will vary, including the extent to which your loan payment will be reduced when rates go down by a certain percentage.
Also, confirm how is your floating home loan is referenced / linked and the periodicity of updation of that index.
Also ask your bank whether the index is internal or external and how and where it is published.
Ask about the loan's annual percentage rates (APR).
2) Reset Clause
Check the reset clause, especially in the case of fixed interest rate loan as the rates will not be fixed throughout the tenure of the loan.
3) Spread/Mark up
Check if the margin in the case of the floating rate is fixed or variable. The rate of interest you have to pay will vary accordingly.
A home loan often requires payment of various fees, such as loan origination or processing charges, administrative charges, documentation, late payment etc. Every lender should be able to give you an estimate of its fees.
Many of these fees are negotiable and can be waived also. Ask what each fee includes. Sometimes several components are lumped into one fee. Ask for an explanation of any fee you do not understand.
Also, remember that most of these fees are perhaps negotiable! Do negotiate with your bank before agreeing to a particular fee.
See how the all inclusive rate compares with the all inclusive rates offered by other banks. While planning your finances, don't forget to include the costs of stamp duty and registration.
5) Down Payments / Margin
Some lenders require 20/30 percent of the home's purchase price as a down payment from you.
However, many lenders also offer loans that require less than 20/30 percent down payment, sometimes as little as 5 percent.
Ask about the lender's requirements for a down payment and also negotiate with him to reduce the down payments.
Once you know what each bank has to offer in terms of rates, fees and down payments, negotiate for the best deal. Ask the lender to write down all the costs associated with the loan.
Then ask if the bank will waive or reduce one or more of its fees or agree to a lower rate.
Once you are satisfied with the terms you have negotiated, please do obtain a written offer letter from the lender and keep a copy with you.Read the offer letter carefully before signing.