Taking a home loan? Ask these 5 questions!

Home loan features!

Are you approaching your bank for a home loan smartly? Or are you like a needy person waiting for their help and mercy? In the previous decade many used to queue up at the desks of bank managers for their mercy to get home loans approved, and were satisfied with whatever they offer. But things have changed now as customers are turning smart and with increasing competition banks are now queuing up for you. So you can definitely be a smart buyer to negotiate for the best deals and to avail the maximum out of your bank.

Here are 5 incredibly smart questions to ask your banker before taking a home loan.

1: Will you be considering statutory expenses?

One smart question you can ask your banker before finalizing the home loan deal is about the inclusion of any statutory expenses. Generally banks do not cover statutory expenses like stamp duty or registration charges, any VAT or service tax to be paid as well as any other miscellaneous or legal charges. Generally all home loans are approved by considering only the cost of the property. Banks and NBFCs may however consider funding of statutory expenses in certain cases either under a onetime scheme or under special cases where market value of the property may support offering such a facility. Irrespective of whether you are taking a home loan under any special scheme or not, it is always a good idea to ask your banker about the loan inclusion for statutory expenses.

2: Would you consider my insurance policies as additional collateral?

Don’t get disheartened if your bank says that you are not eligible for the applied amount. Even though they won’t tell you all possible ways to enhance your loan eligibility, a little knowledge about the possibilities and a smart suggestion after knowing their logic can help you. For example, banks consider your insurance policies as additional collateral to enhance your loan value. Or if you have an FD in the same bank, it will be helpful to enhance your eligibility. The banker may not tell you all these loopholes, but be smart to ask them, ‘can you consider additional amount by keeping my insurance policy?’

3: How will the changing interest rates affect my home loan?

You get a competitive interest rate as compared to the next bank, and you are happy with it. But have you thought of asking your bank how the changing interest rates will be affecting your home loan?

The fixed versus floating interest rate dilemma has been traditionally one of the most difficult decisions for home loan borrowers. Over the years with fixed home loans becoming way high compared to floating rate of interests, most home loans have been offered with floating interest rate. The interest rates offered by the banks depend on the RBI repo rate which is announced periodically. A decrease in repo rate usually results in lowering of interest rates. Before finalizing the home loan, it is essential to check with the banker about how the changing interest rates would affect the home loan.

Sometimes banks and NBFCs offer a reduced interest rate only for new home loans and not for existing home loans. Similarly in some fixed rate schemes, if the rates go up above 2% to 3% for deal rate, your rates may change. Ask and clarify all these with the bank.

4: Do you allow home loan refinance? : Sometimes home loans may get difficult to repay due to variety of reasons including a financial crisis. You may sometimes want to transfer your loan to another bank in the middle due to lesser rates offered by the other or due to a bad relation with the existing bank. And many realize it at the time of transfer only that pre closure charges are applicable for refinance or balance transfer, which makes no sense in transferring.

So be smart, ask your bank beforehand how it will be if you request for a balance transfer. In a market scenario where interest rates are falling refinancing can mean a substantial reduction in many cases.

5: Do you offer mortgage as an overdraft facility? :  The changing face of the home loan market has made banks and NBFCs introduce various new features. Overdraft on home loans is one such which allows the borrower to park surplus funds in the loan account. You are free to withdraw the deposit and use the funds in case you find an attractive investment opportunity while the interest rate is levied on the remaining balance. Instead of prepaying the home loan, you can look at using the mortgage as an overdraft. The facility is offered only a by a selected few banks under various flagship schemes.

Many people still buy home loan without checking and comparing the various aspects of it. Only the rate of interest is taken as the one factor before finalizing a home loan agreement. There are however many other factors that you must keep in mind and discuss proactively with the banker before choosing the home loan deal.

 YOU MAY ALSO WANT TO: Calculate your EMI be fore picking the right home loan for you – Home Loan EMI Calculator