Five things you need to do before you seek your home loan

Home loans are created for those borrowers who want to purchase a new flat, home or plot or carry out extension work or renovation work their existing property. In recent times, the number of people seeking home loans has gone up considerably. This is due the favourable economy to purchase new property and also due the increased disposable income of people. The fact that the government and banks are both offering attractive deals for home loan seekers also has a role to play in this increase of home loan seekers.

If you too wish to purchase property and are considering a home loan, here are a few important things that you need to know before you enter into any agreements.

1.       The first and foremost thing you need to do when seeking a home loan is to determine your eligibility. This means you need to find out how much money you can borrow based on your monthly income. You can arrive at this amount by subtracting you monthly expenses from your income. Some other factors to consider would be your partners’/spouses income, any other loan repayments and liabilities and the stability of your income.

2.       You need to have another person from your family, preferably your spouse who will be the co-applicant for the loan. Most banks and NBFCs make it mandatory for loan seekers to have a co-applicant.

3.       Before seeking your loan, you need to know all about taxing on home loan. You can seek income tax benefit on home loan as the principle amount can be claimed for deduction under Section 80C of the Income Tax Act.

4.       Create a checklist of all the important documents that you need for your home loan application. These include proof of the purchase and identity of the buyer. The other things that the bank requires are salary slips authenticated by your employer, Form 16 for tax saving on your home loan and balance sheets or bank statements of the last six months.

5.       You need to do a lot of market research before you choose your home loan interest rates. They are of two types, fixed and floating. A fixed interest rate remains constant throughout the period of your home loan while a floating interest rate is subject to ups and downs based on the market and government rules and acts. Before choosing an interest rate you need to do some market research and only then make an informed decision.