Thinking of taking a loan against property? Here are 5 thumb rules to follow.

Taking out a loan against property is no walk in the park. It is in all respects, a serious matter and hence there are some ground rules you need to follow to ensure a smooth journey with a loan against property. So before you pick up a pen and sign the application form, verse yourself with these thumb rules.
Borrow within your financial capabilities.
Before you commit to a loan against property, it’s worth it to calculate your financial standings and repayment capacity with regard to the amount you borrow. Remember the loan amount you receive will be in the range of 70% to 90% of the value of your property with an interest rate varying from 9.65% to 16%. Also take into consideration that it is a rough thumb rule to ensure that your monthly expenditure towards all your loans combined is not more than 50% of your taxable income. Keeping these factors in mind, if you think the loan against property is still a viable option, then and only then, you should go ahead with your application.

Short tenures work better in the long run.                                                                           The maximum tenure for a mortgage loan is 15 years and though it may seem very alluring to pay a smaller EMI over a long tenure, bear in mind that long tenures invite higher interest rates. So, if you do choose to take a long tenure, you will inevitably end up paying more on the long run. Therefore it makes sense to take out a loan with shorter tenures. And if your financial standings cannot support a larger EMI now, you can always approach your lender ask them to increase your EMI as and when you financial abilities better year upon year.

 

Insure yourself.
Mortgage loan generally mean large loan amounts and so taking out an insurance cover along with your loan makes sense in the rare occurrence of any dire circumstance. In which case all your family members, or who so ever you wish to insure, remain protected, come what may. This thumb rule is just so you leave nothing to chance.

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Read all offered documents carefully.
All the terms and conditions for the loan have to be mentioned in the documents offered to you before you take out the loan. It’s advisable to sit down with someone who’s well versed with the topic and understand each and every point. Just signing it without studying it could lead to you getting blindsided in regard to any hidden costs or additional charges such as processing fees, pre-closure charges and sales tax. So read, understand and study the fine print before you put your signature on anything.

 

Shop till your interest rates & processing fees drop.
Last but not least, it’s imperative that you weigh all your options, consider every possible choice and look at every single alternative before picking a loan against property. By this we mean, go to many financial institutes, understand their offerings, see which one gives you a better interest rate, or loan amount or lesser administration and processing fee and only pick an option that completely suits your needs.

A loan against property is the best way to raise funds for your needs and is always a smart and secured borrowing option. But be sure to follow these rules and you will see that your experience with such a loan will be a much smoother and convenient one.

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Author: homeloan

Use the interactive Home Loan EMI calculator to calculate your home loan EMI. Get all details on interest payable and tenure using the home loan calculator.

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