Ignorance is bliss, but not for loan buyers. Many home buyers are unaware of the several options available when it comes to a home loan. Call it “research fatigue” or the lets-get-this-out-of-the-way syndrome, majority of home loan borrowers look only for interest rates. Here are six options you are likely to ignore when finalizing a home loan deal.
Bridge loan: If you are looking to purchase a new property after selling off an existing one, bridge loans are for you. A bridge home loan provides funds for down payment to buy the new property until your current house doesn’t get sold. This is a better option than an expensive personal loan, and comes with a tenure of one to three years. You can dispose off your property within that period and pay it back.
If you are unable to sell off your property within the stipulated time period, you can get your bridge loan converted to a mortgage loan albeit with a slightly higher rate of interest.
Note: Approach the bank for a bridge loan only after you have shortlisted a buyer for your property as bridge loans in most cases are facilitated only after you enter into a formal agreement for sale with a prospective buyer.
Flexi Loan: Flexi loans, as the name suggests are smart payment options, where your loan account is linked to a current account which functions like an overdraft account. You can withdraw amount from a home loan account as per the sanctioned limit. And whenever you have excess money, it can be diligently parked in the account and the principal outstanding of the loan is adjusted for the balance kept in the account by taking a weighted average.
The biggest advantage of a flexi home loan is that you withdraw money only as per your requirement and save on interest outgo for the loan.
Note:It is important to note that the interest rate for flexi loan is usually higher than that of a traditional home loan. Opt for it if you are likely to get surplus money which can be parked in the loan account regularly. Borrowers who have taken loans against under-construction property can also benefit from it.
Teaser loan: With the uncertainty over interest rate fluctuations of loans during the past few years, banks have introduced teaser loans to offer some respite. Teaser loans are fixed loans for a pre-determined period of two to three years. After that it changes to floating rate loan as per the prevailing base rate at that time.
If banks offer teaser loans with fixed rates at a good rate or lower than the current rate, it is a good idea to consider it in a rising interest rate economic scenario.
Note: Teaser loans are also good if you feel that interest rates are likely to rise soon. But if teaser loans are offered at rates higher than floating rates, or if the economy is likely to improve soon, it may lock you up with a higher rate.
Second mortgage: Let’s assume you already have a home loan running and are now seeking additional funds to raise money for other expenses related to your home purchase like interior designing or be it for another cause like purchase of a plot. You cannot afford a personal loan because of its high interest rate and your bank is not offering a Top Up loan at this stage. There is a case to consider a second mortgage loan.
Under a second mortgage loan or pari passu mortgage, you can mortgage the same property with two different banks to borrow money depending on the value of your property. The lending banks will have claim upon the property, depending upon the proportion of money borrowed.
Note: Second mortgage loans are offered with a mutual agreement between both lenders. The second lender may offer you a loan at a higher interest rate than the first.
Tranche EMI Home Loan: Many loan takers fail to calculate the huge amount they are losing as Pre-EMI.Home loans taken against under construction properties often call for a good sum to be paid as Pre-EMI, as the loan disbursement is linked to the level of construction, and the actual EMI starts only after the full disbursement. And until the actual EMI doesn’t commence, borrowers end up paying interest for the disbursed amount. The situation worsens if the project gets delayed.
Opt for a Tranche based EMI payment option here. Under this, you can start making EMI payments soon as the first installment of the loan is disbursed. Here you are repaying for the undisbursed amount, but the total output remains the same, and it saves you from Pre-EMI.
Note: If you think that you are paying additional amount under Tranche EMI option, you are wrong. The only difference is thatunlike regular EMIs that start only after full disbursement, here you are starting it early.
Proportionate release: Imagine that you have shortlisted a flat that costs 70 lakhs, but your loan eligibility is only 50 lakhs. You may get the loan amount only after paying off the down payment, ie, Rs.20 lakhs, but you are finding it difficult to raise that amount now.
You can talk to your bank about a proportionate release option. Under this option you can make the down payment in installments and the loan amount will also gets disbursed proportionally to meet the builder’s payment due dates. This allows you to have more flexibility to manage your finances.
Note: Not all properties are available for proportionate release option. Usually banks offer this for projects of reputed builders only.
Options are many, but your banker may not offer all of them when you seek a loan. By being a smart buyer you can get your home loan tailor-made for you and thereby save a lot!
YOU MAY ALSO WANT TO: Figure out how much you are saving with these options – Home Loan EMI Calculator