Basics of Home Loan
Vindoji : Hello Sharma Ji! Long time! I didn’t know you are still around.
Sharmaji : Hello Vindoji.. Good Morning! Yes, where will I go!
Vindoji : I mean, you were moving to your new home right?
Sharmaji : (a little hassled): Yes! But.. But I have not been able to close the deal for a home!
Vindoji : Why? What happened?
Sharmaji : Buying a house seems like something, which I can’t afford. I don’t have enough savings to make the huge payment.
Vindoji : But why do you want to spend all your savings on your home?
Sharmaji : What do I do then? I have no one else to support me!
Vindoji : Go for a Home Loan, instead.
Sharmaji : Home Loan?
Vindoji : Yes. You can borrow from a Bank or Housing Finance Company for home purchase, construction or renovation. And then repay, in regular installments along with interest.
Sharmaji : What about the interest rate?
Vindoji : The interest rate is almost uniform across Banks and Housing Finance Companies and depends on rate of interest offered by Reserve Bank of India. However, the interest rate that the bank or housing finance company charges depends on the customer profile and his past credit profile. Also, there are 2 types on interest rates – Fixed and Floating home loan interest rates. The fixed rate of interest is fixed throughout the tenure and the floating rate may go up or down depending on changes in the money market conditions and internal policies. The fixed rate is generally bit higher than the floating rate when you first take the loan.
Sharmaji : I will have to think on that. So will they give me the full amount that I need to purchase the house?
Vindoji : No! But, you can get up to 85% of the amount. Remaining 15% you can manage with your savings. I think that’s quite possible, right?
Sharmaji : Yes. That can be worked out. But, I hope Home Loan will not be a burden for me.
Vindoji : I do not think so! Right now you are paying your house rent, while with the loan you will be paying your EMIs. Home Loan will not only help you own a home but will also get you a lot of tax benefits. Also, in time the value of your property will appreciate. You can choose to pay lesser EMIs by opting for a longer home loan tenure.
Sharmaji : True. So, can anybody get a loan? And any amount?
Vindoji : Not anybody! They check the person’s age, occupation, income, repayment capability, credit score and property details before sanctioning the loan and its amount. The rate of interest that they charge is also dependant on these factors.
Sharmaji : This is very simple! I think I should consider one right away.
Vindoji : Definitely!
Sharmaji : But I don’t know how to go about it.
Vindoji : Don’t worry! Watch out the next video to learn more.