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Sunday, January 10, 2016

Precautions while Home Mortgaging


Precautions while House mortgaging


Getting finance for buying homes by mortgage is an important transaction of large section of people. For most of the people, buying home is one time process which involves financing by pledging mortgage of the home bought. As a result of complexities involved in the process and the presence of innumerable lenders in the financial market, ignorant borrowers often commit mistakes while mortgaging. Mistakes made in the mortgage process can cause everything from minor annoyances up to, and including, financial disaster, thus, you must be very careful while mortgaging your property.

To avoid mortgage mistakes, the very first thing that any home buyer must do is to clearly establish that he/she is the only person responsible for the payment of the mortgage; therefore, any and all decisions should be first and foremost personal ones. He/She can seek help of the lender, the Real Estate Agent, his/her friends or relatives in the process of decision making, but, the decision should be personal.

Here are some important precautions which the borrowers must consider while examining and choosing the mortgage.

  • Analyze your requirements and decide on accordingly. Also see if the cost involved in mortgaging fits into your estimated budget.
  • Visit more than one bank/HFC and compare the quotations given and interest rates. Select the one which offers maximum benefit and serves your purpose.
  • Pay proper attention to the tenure of the loan. The EMI may come less for longer tenure, but the total interest outgo will be higher.
  • Collect all information about processing fees and time. Some banks/HFCs may waive processing fee for processing loan but they build this cost on their interest rates.
  • Consider pre-payment options. Most of the private banks/HFCs charges 2% - 3% of the loan in the form of penalty in case you decide to pre-pay the outstanding amount. However, the nationalized banks do not charge such penalty.
  • Be regular in making your payments on time. Default in payments results in penalties and can also adversely affect your credit history and profile.
  • Make sure that all deals and offers agreed upon are supported by relevant papers. So make sure you always ask for a letter in a banks letter-head mentioning the likes of, exact rate of interests, processing fees, pre-payment charges along with interest-schedule.
  • Also before signing the documents, make sure you recheck all terms and conditions.
  • Ensure that you submit the title of ownership of your property after due verification from the local authority of your area. Do not at any circumstance give any false information. This may amount to fraud and could land you in trouble.
  • Do not sign any blank documents. Even if it takes you a few hours to fill-up the form, please do so. Do not leave anything for the executive to fill-up.
  • Take acknowledgement for title and other documents handed over to the HFI as security.
  • Take copy of loan agreement and other documents signed for availing the loan.
  • Finally, once you have received a loan do your best to pay it back as quickly as possible. Banks/HFCs make their money off the interest they charge and the sooner you pay back a loan the less money you will have to pay in interest.
  • Verify that the HFI has given credit for the EMIs repaid and reduced the outstanding loan amount as per agreed schedule.
  • Track your loan account closely.
  • Obtain repatment certificate at the end of year, avail tax benefits and enjoy happy life in your own sweet home!
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