HOME LOAN FACTS
While the borrower has to provide some amount from personal resources, a bank usually lends between 75-80% of the agreement value. Some banks are willing to include the stamp duty and registration charges within the purview of the loan, although the RBI stipulates a ceiling of 75%, which technically makes the loaned amount 80% of the agreement value. Depending on how the economy is faring and how much liquidity exists on the market, the lending rate attached to the home loan also changes from time to time. One of the basic home loan facts not commonly known is, that it is a prerequisite for most banks that the borrower take out an insurance policy to protect the home loan. This ensures that they will get their money back if the borrower dies or is for some other reason incapable of servicing his or her loan. This is because, such an agreement between borrower and lender is over extended periods of time. Unless the borrower finds the financial means to prepay it in part of in totality, a home loan is generally repaid over several years.
The bank has right to unfix and raise the fixed interest rate, in the event of unforeseen events or changes in money market conditions. For any loan, rate of interest and principal are two basic components involved while calculating EMI payment. A major part of the amount goes in paying up the interest, in the first few years of your loan repayment tenure. After you have paid much of the interest, the trend reverses after a few years and the principal repayment increases. Banks have to increase tenure up to a certain point, as today home loan interest rates are high everywhere. The EMI you pay fails to cover the loan amount, if the interest rate continues to go up. These are some important home loan facts which you should be aware of before buying a home.