While taking a housing loan, the following issues need to be considered:

  • Bank or financial institution offering loan: It is generally safe to take a loan from one of the leading financial institutions.

  • Rate of Interest: The rate of interest on housing loans keeps constantly changing . It depends on the tenure of the loan, fixed/floating rate, credit profile of the borrower etc.

  • Fixed/floating: You can either opt for a fixed or floating rate of interest. The fixed rate is generally 50-75 basis points higher than the floating rate. The floating rate is linked to the PLR of the lending institution.

  • Processing fees: A processing fee is charged by financial institutions/ banks for verifying the title report, financial performance, valuation of flat and so on and processing the loan application. This fee can be up to 1% of the loan amount. During special periods like property exhibitions, or other events banks and financial institutions offer special interest rates and waive/ offer concessions in processing fees, so buyers can benefit from such offers.

  • Administrative Fees: Some Banks/ Financial Institutions charge an Admin Fees upto 1%. Some banks may charge both Processing & Admin Fees or just any one of them or a fixed fee instead of a percentage.

  • Mortgage Fees: Some Banks/ Financial Institutions may charge a mortgage fee on the document of the loan agreement. This will generally will be 0.1% of the loan amount. This amount is payable to the Stamps & Registration Authority.

  • Tenure of the loan: The tenure of the loan should be decided by the buyer after taking into consideration various things like repayment capacity per month, earning potential over the next few years, other financial commitments like weddings, children's education, car loan and other liabilities if any etc. The expected outflow on property maintenance should also be considered.

  • Generally, housing loans are available ranging from 5 years to 25 years. Some banks also offer step-up housing loans which charge a lower EMI for the initial years which gets increased for the later period. Such loans are generally considered favorably by those house buyers who are in the early stage of their careers and who expect earnings to improve significantly over a period of time.

  • Other aspects: Consider the percentage of the cost of house that is available as loan etc. Banks offer 85% of the property cost+ Stamp Duty+ Registration charges. Some banks offer up to 95% cost of the property by way of loan. Another important factor is financing for the interior work, furniture etc. Some institutions have started providing a composite loan that extends over the cost of interiors and design. Few institutions may even fund the Parking charges.

    We are not giving legal or financial advice and one should consult a appropriate consultant, advisor etc.



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