Purchasing a home is one of the biggest investments one makes in their lifetime. Because of the large sum involved in the transaction and the tenure of home loans which can last for 15-20 years or even more, it is very important that you are well aware of all the important terms associated with a home loan.
As the terminology is often confusing for standard borrowers, we have listed a few important terms that you should definitely know.
Margin
When you apply for easy home loans, the lender will not provide you with the entire value of the property as a loan. They generally lend 80%-90% of the property’s value and you are. required to put the balance amount of 20%-10%. The part that you pay for buying the home is known as margin or down-payment.
Credit Appraisal
A lender of the loan will check a number of parameters, like your income, credit score, age, etc. before approving the loan. The loan will only be approved if the lender is satisfied with these parameters. This whole process of checking the eligibility of the borrower is known as credit appraisal.
Pre-Approved Property
When you apply for the best home loans, the lender will legally verify the property, its documents, etc. before approving the loan. A lot of developers get their project approved by a number of lenders to make it easier for the buyers to get the loan. Pre-approved properties accelerate the loan approval process.
Interest Rate
Interest rates on home loans are of two types- fixed rate and floating rate. With a fixed rate loan, you’ll pay interest at a fixed rate throughout the loan tenure. On the other hand, floating interest changes with respect to the base rate of the RBI. When you take a floating interest loan, the interest will change with respect to the adjustments made by the RBI in the base lending rate.
EMI
The Equated Monthly installment or EMI, is the amount that you pay every month to the lender for repaying the loan. It is a combination of principal amount and interest charged on the loan. It remains invariable all through the term of the loan, however, you can decrease or increase it by contacting the lender. Depending on whether you increase or decrease the EMI amount, even the tenure of the loan will change.
These are 5 of the most important terms that you should know if you are planning to apply for the best home loans. Rather than visiting multiple lenders, a better alternative is to opt for online home loans as you can easily compare the loans to find the best deal and even use the home loan calculator to know the exact amount you’ll be required to pay each month.