When you go for house hunting you are confident that your income being 35 thousand Indian Rupees will definitely go on increasing and as you move up the ladder you will be able to pay larger EMI(Equated Monthly Installments). So you happily go in for a larger house as compared to other options and lenders are happy to provide you loan, they earn from high interest.
The journey of repaying the home loan begins with smaller EMIs and proceeds with increasing in amount. Many people opt for flexible rate of interest in the repayment schedule as they are confident about their increase in salary over the years. But it is better to take a informed decision than be sorry later. Reaping EMIs is a stressful task since this goes on for 10 to 20 years. Hence an intelligent borrower would research the market, search for rates of interest and go in for the best deal, the one which helps to save precious interest over the years.
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| Intelligent Borrower |
Many lenders will allow you to take a home loan on 40% of your income. This income is not the total income on your salary slip. Deductions will have to be made regarding cuts on income tax, insurance and other investments. Here we consider the net income, that is disposable income , which you have in hand. It would be better to be on the safe side and take a loan approximately about 25 to 30% maximum of your income. However much you adjust the expenses this figure will allow you to make the repayment process of home loans passable and stress free.
I am not saying that you underestimate but dreaming in a practical manner will be better. Our early generations did dream big and hence now the property they have purchased has grown by many times. Keep it in a manageable amount and do accommodate for rises in income and position over the years. But take your own decision regarding the loan available, more so if you have a very good rise in salary you can invest the money in other profitable investments or adjust you EMI by changing your repayment schedule later on to accommodate a higher EMI.
After all the applications and approval of your home loan you are happily paying your EMIs every month. The home loan amount being very large along with the rate of interest the borrower has to maintain relationship with the lending bank for many years. There are bound to be unexpected problems coming up within the long repayment tenure of 15 to 20 years.
One of the problems coming up from the side of the lending institution is that the bank may shift their branch to some other place. It can also happen that the bank may close down. What can the borrower do in these circumstances?
The borrowers have to therefore keep regular contact and communication with the lending institution. The most important point here is that any borrower has to get an understanding and working of the bank before committing regarding the home loan and signing on the dotted line. Peruse the documents very carefully and understand all aspects and clauses mentioned in the home loan document. In case there are any queries or doubts then you can clarify them with the financial counselors.
This will help you to get a clear picture about the amount you have to pay and the facilities you get regarding and default or unexpected problems. Here the borrower can also discuss all other matters which may or may not be mentioned in the document. These include sudden problems with the financial status of the bank, like bankruptcy, losses, inflation; shifting of branches of the bank and how to follow up on future payments; loan recovery procedures adopted by the bank in case of your delay in payments; in case of take over by other bank due to failure of your bank too keep up financially; any other problems due to unexpected natural calamities or hazards.
Though many housing banks and loan lending institutions that have clause for these factors, usually they are written in technical terms which is not easily understood by the borrower. Hence you must clarify all these doubts before getting your home loan approved. In times of uncertainty it pays to talk and enquire more and keep your options open.
All the Best from Rizwana!
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