A home loan deal comprises of various arcane terms but there are a few things that are a few things that a borrower must know and should be very sure about that. Regardless the complexity involved in home loans it is very necessary to have every detail about it, as it is the borrower himself that is going to bear the burden of the home loan. Even if a borrower takes care of at least a few details that can also help a lot.
A common mistake that most of the borrowers commit is that they do not take the loan agreement very seriously. Sometimes people tend to take care of each and every aspect of the loan but misses out to check the most important document, loan agreement.
The lenders try to lure customers through attractive advertisements and features but there are a few hidden terms and conditions associated with them that the lenders avoid disclosing; but they are very significant and sometimes the loan scheme turns out to be altogether a different one form the scheme that he has opted for.
All such conditions are mentioned in the loan agreement and that is the only tool by which he can actually determine the nature of the loan scheme. To avoid falling in the trap of the lender a borrower must reckon the loan agreement. There maybe a lot of loopholes in that agreement that a common person can find difficult to understand; in that case he can consult a professional broker, it can be of real help for the borrower.
The other thing about which the borrowers might be confused about is which interest rate scheme to opt for. There are basically two types of interest rate scheme available, floating and fixed rate scheme. Under fixed rate scheme ideally the interest rate remains the same during the whole loan tenure and under floating interest rate scheme it fluctuates with market rates.
Considering the present market scenario, a lot of people might prefer for fixed interest rate scheme but here there are a few things that are requires to be kept in mind. The first thing is that the interest rate under fixed interest rate scheme is quite high as compared to the other interest scheme. Secondly even though interest rate under fixed rate scheme ought to be the same during the whole loan duration but the lenders tend to increase the loan rates after a certain time period and that makes it really very expensive.
The other disadvantage that the borrower has if he chooses for a fixed interest rate scheme that even if the market rate falls, the borrower will be charged according to the inflated interest rates. In other words, a borrower in such case can never enjoy fall in interest rates. the overall cost if the loan is primarily governed by the interest rate and so a borrower must be very judicious while choosing for the interest rate scheme.
Apart from that there are also several hidden costs that the lender charges and all that is mentioned in the loan agreement and if the borrower have not read that properly then his loan will cost him far more that what he would have ever imagined. So it is very important form a borrower’s point of view to at least take care of these basic things to get what he expects from his home loan.
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