Buying your dream home can be very exciting! If you are opting for a home loan then this article will provide some insights on what are the key elements you should watch out for in your loan agreement. Scan your agreement thoroughly to understand what each clause implies before you sign it.
You need to especially focus on the clauses that affect the cash flows, such as interest rate and pre-payment charges.
Rate of interest
The rate of interest determines the EMI. The rate of interest, generally, can be of two types: fixed and floating though the latter is the most common these days. There is another addition to this category now called teaser loans which costs you less in the first few years.
Let's see what clauses affect your interest rate:
Changes in Base Rate: Base rate is determined by an individual bank depending on various internal parameters including RBI's changes in repo and reverse repo rates. Banks cannot lend at a rate lower than the base rate. The floating interest rateRead More »from Things to watch out for in your loan agreement