It is a common fact known to most people that a mortgage loan is one of the easiest financing options to avail. The prime reason behind this convenient availability is that these advances are provided against high-value asset security. The risk of lending is thus reduced manifold, which allow the financing institution to lend to even the individuals holding low income. Nevertheless, as much of an opportunity this secured loan brings for borrowers for credit score build-up, it opens a world of responsibility as well with the need for timely repayment remaining paramount.
Several other aspects require specific borrower attention for the ultimate and disciplined financing. It is always wise to know about these aspects. Better yet, you can keep yourself ready with a few tips in place so that the loan is managed easily. And repayment is complete in time without the liability straining your finances. Let’s check out some crucial tips that can help with borrowing as well as management of the loan.
Check and work on your credit history
Even though a mortgage loan is a secured advance, the importance of credit history and report is not diminished. Lenders would still check your credit history to determine your creditworthiness for the advance. With a score above 700 considered as ideal. Thus, one of the best ways to improve your chances of loan approval is to work on your credit score and history.
Know that it is a reflection of your past credit behaviour. And any activity undertaken can take up to 6 months to reflect on your history and score. You can thus rectify your credit behaviour, such as maintaining repayments, availing credit mix, and the likes for it to positively impact your credit score in the long run.
Check your maximum loan affordability
A mortgage loan is a high-value advance, which leaves the borrower with a multiplied responsibility. For managing repayments, both in quantity and as per the tenure involved. It is thus the borrower’s responsibility to check if the amount they are availing is affordably repayable or not. To check this affordability, you must consider the total loan liability payable. By the tenure’s end, including the loan principal and the interest payable.
The best way to check this is through an EMI calculator. Which allows you to select a suitable loan amount and tenure as per the EMIs. Total loan liability and total interest payable are computed. Further, you can also use an eligibility calculator to check the maximum loan amount available for you as per your borrowing profile. Based n these aspects, you can finally determine your affordability.
Determine the purpose for which you seek this financing
When availing of the advance, it is also, first and foremost, important to determine the purpose for which you are borrowing. Determining the expenditure allows you to keep a check on the expenses. Further, even if you are eligible for financing over and above this expenditure. It can help stay mindful regarding how much to borrow. As over-borrowing has always remained an unhealthy practice when it comes to exercising financial discipline.
Decide on the type of mortgage loan
When understanding mortgage financing, you must know that a mortgage loan is available primarily under two types in India, namely home loans and loans against property. You must first thus determine the type of mortgage loan that you are seeking to avail. Given that the home loan and the loan against property eligibility requirements remain largely similar. Checking either of the requirements would suffice. However, financing as per LTV can vary from one to another. In the case of home loans, up to 90% of the house’s current market price is available for financing as LTV. For loans against property, however, LTV goes as high as 95%.
Choose between fixed and floating rate levy systems
As these are long-term loans, your choice between fixed and floating rate levy systems can critically impact the overall loan liability. Usually, fixed rates are set at a notch higher than floating rates, which, in the case of mortgage financing. Can mean significant difference in the total interest liability payable. You must also consider between the two based on the projected market rates. Note that these systems of levy cannot be changed in the middle of tenure unless you are choosing to refinance your loan. With a new lender, forging and agreeing to new terms of your loan.
Apart from these tips, you must also be ready with all the necessary. Documents required when applying for a mortgage loan. It pacifies loan processing and allows for minimal hassle in approval. Finally, when applying, look for available pre-approved offers with your lending institution. Which can further fasten loan availability through simplified processing of your application and minimal documentation.