Take these factors into account when choosing a mortgage term in 2020


Recorded since March 2011, there has been an average annual increase of 7.1% * in the price of real estate in India until March 2019. Naturally, an increasing number of people have chosen to acquire space ownership. residential. Hence, they have opted for high amount loan programs to meet their financial housing needs. Facilitating borrowers, these credit advances are thus accompanied by an extended period of up to 20 years, facilitating the repayment structure.

However, due to the availability of many of these financing options, customers applying for a home loan should consider several factors before choosing a financial product. Careful consideration of these factors ensures the convenience of the borrower while repaying his loan.

One of these factors that must be taken into account is the term of the loan which plays a crucial role in determining the total cost of the loan. Additionally, while taking advantage of long-term advances such as home loans, individuals can use the relevant HFC’s loan EMI calculator to determine the term that best suits their repayment capacity.

Here is a list of a few factors that should be taken into account when choosing a loan term that allows you to get the most out of your used loan.

Applicant’s age

Age is a crucial criterion for eligibility for a home loan as well as an essential deciding factor for the duration of the loan. A younger candidate with more years in their professional career is more likely to look to longer loan terms, as they will have a longer period of financial stability. This reflects their creditworthiness and therefore makes them eligible to negotiate longer maturities.

Repayment capacity

A borrower’s ability to repay is linked to their income as well as a few other factors. A crucial aspect to consider in this case is that of living expenses and other expenses which cannot be avoided by an individual.

The applicant should plan the financial arrangement before fixing the term of the loan. Borrowers can easily use a home loan calculator to find the exact amount of EMI they will need to repay each month.

Any borrower referring to a simple guide to increasing their existing home loans can also use this EMI calculator to calculate the exact repayment amount and therefore set the amount of term that best suits their current repayment capacity.

Financial liabilities

Any potential borrower can have many existing financial liabilities. These fall under FOIR or fixed bond to income ratio and should be considered when adding another EMI to the monthly EMI total.

Financial institutions check these financial obligations to assess the risk factor associated with lending to a particular person. Conversely, borrowers should also check their financial liabilities and plan their due dates accordingly. Defaulting on any of the existing lines of credit can have a detrimental effect on an individual’s overall credit scenario.

Interest rate

Several factors influence the interest rate on a home loan. This interest rate offered on these loan products is indirectly related to their repayment term. In addition, opting for a shorter term ensures that they pay a considerably low amount of interest and therefore a lower cost of borrowing. So, approaching a lender who offers a competitive interest rate is ideally essential.

Prepayment options

Having the ability to prepay a loan is extremely crucial as it allows clients to reduce their term as well as their overall interest. Most of the time, in the event of early repayment, borrowers do not have to pay interest over several months of EMI. Therefore, the total expense of repaying the interest amount decreases significantly.

Once a potential borrower has decided on the loan term and calculated the exact EMI for the home loan, the application process itself is convenient.

It is essential that clients also take into account other crucial factors before choosing the financial institution for their home loan. The specific characteristics offered by HFCs should also be checked in detail. While the right content guarantees ease of repayment, the right features promise maximum benefits from the financial product.

** Source: https://www.ceicdata.com/en/indicator/india/house-prices-growth

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Posted on: Tuesday January 14th, 2020 13:20 IST

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