4 Important Tips to Consider When Availing a Loan Against Property

4 Important Tips to Consider When Availing a Loan Against Property
  • Opening Intro -

    Typically, the financial institutions lend about 60 to 70% of the property value.

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If you are availing a loan for buying a real estate property, you would have to provide a mortgage against the funds that you are borrowing. The amount of money that you can borrow depends on the value of the property.

Typically, the financial institutions lend about 60 to 70% of the property value. If you are looking to avail a loan for buying a new real estate property, you need to be aware of the four rules that would help you get the best out of your loan deal.

1. Do not bite off more than you can chew

This implies that you should not get over-ambitious and apply for a loan that you will not be able to repay later. It is quite obvious that you would want to have a luxurious and a big house, but you need to remember that the bigger house comes with a hefty price.

You need to be aware of your current and future financial credentials and apply for a loan that you can quickly repay without reducing your expenses on the essentials.

Also, bear in mind that you need to have a certain amount of cash to meet the expenses during an emergency situation like sudden loss of employment or a medical emergency.

2. Opt for a short-term loan

Usually, loan against property comes with tenure of 15 to 20 years. Although the longer duration reduces the monthly EMI, you would have to continue paying for a long time, and consequently, you would end up paying an enormous amount of money as interest than the principal amount.

On the contrary, if you opt for shorter loan duration, the EMI would be higher, but if you look at it, in the long run, you will pay off the loan quickly.

3. Always take insurance

If you are taking a huge loan, it is best advised that you take an insurance cover. Although it would add to your insurance cost, it would benefit you in the long run. For instance, if you face any unfortunate situation the insurance cover will help you cover the damage and reduce the burden on your family.

4. Never default on the repayments

If you are availing a loan for buying a real estate property, make sure that you make necessary financial arrangements for repayments. If you default on the monthly EMI payments, not only would you have to pay penalties, but also irregularities in the repayments would affect your credit score, which in turn would diminish your chances of availing a loan later.

Conclusion.

If you have no prior experience with availing a loan or dealing with a financial institution, it would be difficult to understand the technical terms and the finer details of the loan mentioned in the contract. Therefore, before you sign any documents relating to the loan, make sure that you understand every term and condition.

It is advisable that you hire an expert real estate agent or a lawyer to read through the contract on your behalf, and ensure that the contract is in your interest.

Consumer Tips reference:

mortgage affordability tips

 
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Last update on 2017-08-19 / Affiliate links / Images from Amazon Product Advertising API

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