Are you planning to finally make the dream of living in that swanky bungalow come true? That’s a cool move! A house is probably one of your most important assets and building blocks of your financial security. Other pillars of your financial well-being include building an emergency fund, getting your retirement planning on track, buying a car etc. Once you have all these in place, there’s nothing that can threaten your future, financially.
The most important part of planning your finances right is timing it all right. You need to keep all your short and long-term goals in mind before drafting a plan for your financial future. Looking for the right Home Loan and buying the right house is a part of this plan. But before you start, you need to know something important. You need to know your rights as a Home Loan borrower. Knowledge is real power after all! Being well-aware of all your rights can help you avoid any miscommunication with the lender. This knowledge can also help you handle every situation well.
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Before we tell you more about your rights as a Home Loan borrower, you need to be well-versed with the other important aspects of getting a Home Loan. What are these aspects? Here they are:
Great research work
Don’t merely rely on your friend’s research. Get your hands dirty and look for the loan offers that suit you the best. Your needs and preferences are going to vary and so should the loan you’re opting for. This is when some extensive research can come in handy.
Think money first
There are high chances that you got a raise or a promotion that made a huge sum of money readily available to you. Whatever it is, you need to think a bit conservatively. You must be aware of your other crucial expenses and financial commitments before deciding the down payment amount. You don’t want to risk everything else just to get a Home Loan, do you? Other things are important too. Keep that in mind.
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Fixed vs floating
Before finalising any Home Loan offer, you need to know the difference between fixed and floating rates of interest and choose the one that suits you better. As the name suggests, a fixed rate of interest remains the same till the time you pay the last EMI. Fluctuations in the market rate won’t affect your loan payments. This can be good if the market rates go high. You can still continue paying the same interest instead of paying a higher amount than before. Yes, that sounds cool. We know! But here’s the bad part. Even if market rates go down, you’ll have to continue paying a higher interest since it’s fixed and you can’t change it. Floating interest rates, on the other hand, get directly affected by the market trends. As the market rates climb up, the interest rate on your loan rises as well and vice versa. Since the type of interest decides your loan payments, you need to be careful while choosing.
The magic of Credit Score
Did you know that a good Credit Score can help you get a great deal on your Home Loan? Well, that’s why you have us. A score of 750+ considerably increases your chances of getting a Home Loan approval. Even if you’re really lucky and manage to get a Home Loan approval despite a poor CIBIL Score, you’ll still have to pay a high rate of interest. Now that doesn’t sound good, does it? Exactly why you must take steps towards continuously improving your CIBIL Score.
Foreclosure penalties
Before choosing any Home Loan offer, you must understand the foreclosure norms related to it. What’s foreclosure? Imagine you get a promotion or a bonus and you think of getting rid of your Home Loan first. You think of paying off the loan completely by breaking the cycle of EMI payments. You call the bank up in excitement. They listen to you and disclose these two words – prepayment penalty. That’s when you realise that if you want to prepay your entire loan, you must pay a certain amount as penalty to the bank. Phew! You can easily escape these prepayment penalties by choosing the right loan offer.
Processing fee
Processing fee is an important criterion for choosing the right loan offer. Unless you want to receive the shock of your life later, it’s better to enquire well before finalising.
Read the fine print
You don’t want to miss out minor details that could possibly affect your finances later. All those people who keep telling you to read the offer documents clearly (even the person in the advertisement) are right. You need to know the exact details of your loan and for that, you must read the fine print carefully.
Phew! Now that you have a better idea of all the aspects you need to look out for, it’s time to tell you more about your rights as a Home Loan borrower. Let’s go step-by-step:
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While applying for the loan
When you apply for the Home Loan, the financial institution is supposed to provide you all of the following information:
- The interest rates applicable.
- The processing fees payable.
- The amount of fees that is refundable if application is rejected.
- The pre-payment charges.
- The penal rate of interest in case of delayed repayments.
- Extra charges for converting the interest type on the Home Loan (fixed to floating and vice versa).
- Any other miscellaneous clause that might affect the interest of the borrower subsequently.
When the loan gets approved
After the processing and approval of your Home Loan application, you have the right to ask the financial institution about the following details:
- The acknowledgement of your loan application.
- The terms and conditions governing the loan.
- The sanction letter.
- The amortisation schedule.
- A written receipt for all documents.
- A written receipt for all post-dated cheques deposited.
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During the repayment phase
In case you are unable to make your payments on time, there’s a set procedure the lender needs to follow for the recovery of the outstanding balance. Here’s the basic outline of the process:
- Reminder to the borrower through timely notices.
- Follow principles of courtesy, fair treatment and persuasion as mandated by RBI.
- Write to the borrower before initiating the recovery proceedings against him.
- Only send duly authorised representatives who shall deal with the borrower in a civil manner.
- Respect the privacy of the borrower under all circumstances.
- The representatives can contact the borrower between 0700 hrs and 1900 hrs and the content of their dealings with the borrower shall maintain the desired decorum and decency.
- Avoid creating any additional mental strain or undue harassment to the borrower.
- Initiate action against the recovery agency in case of complaint filed by the borrower.
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After the complete repayment is done
Once you’re done repaying all the dues, you need to ask the bank for the following documents, before 15 days from the final payment date. In case the bank fails to do so, you get to take action. Here’s the list of the documents:
- No Due Certificate.
- All original documents of titles of property provided as collateral for the Home Loan.
- Any unused post-dated cheque deposited by the borrower with the bank.
- Letter of final settlement of the loan signed by the authorised official of the bank.
That’s a long list of things to remember. But hey! Being aware of all these rights will help you stay on top of your game. You won’t need continuous help and assistance from your friends or anyone else. Moreover, we are talking about your money. The hard-earned money you slog for every day. You must ensure that it’s safe, right?
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Want more help with money management? Don’t worry! We’ve got you covered.