{"id":4096,"date":"2023-08-28T19:03:19","date_gmt":"2023-08-28T19:03:19","guid":{"rendered":"\/blog\/?p=4096"},"modified":"2024-07-02T15:36:23","modified_gmt":"2024-07-02T10:06:23","slug":"key-things-everyone-must-know-in-a-home-loan-agreement","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/loan-for-home\/key-things-everyone-must-know-in-a-home-loan-agreement\/","title":{"rendered":"Home Loan Agreement \u2013 Key Things Everyone Must Know in a Home loan Agreement"},"content":{"rendered":"\n

For most people, their home is their biggest and most valuable asset. Buying a home is considered one of life\u2019s milestones. Owning a home is both a dream and a necessity, one which requires considerable financial outlay. Buying a home is an important decision in any case. The same goes for the home loan you take out to raise funds. This is a simple yet crucial piece of paper and any mistakes you make in understanding the terms and conditions can cost you a significant amount of wealth over the loan period. Read on to avoid any such missteps and to make the best of your home loan agreement. <\/p>\n\n\n\n

Know More<\/a><\/div>\n\n\n\n

What is a home loan?<\/strong><\/p>\n\n\n\n

A home loan is a special type of loan wherein an amount of money is borrowed from a bank or a private lender such as Tata Capital for the express purpose of purchasing a home for residential purposes. Before signing on the dotted line, the borrower must be absolutely clear on what the various legal and technical terms in the agreement mean.<\/p>\n\n\n\n

Important terms in a home loan agreement<\/strong><\/p>\n\n\n\n

Principal amount \u2013 This refers to the lump sum amount for which the borrower has applied<\/p>\n\n\n\n

Down payment \u2013 Most lenders require a certain percentage of the purchase price to be paid up front while availing the loan. It can range from 15 to 30% depending on the borrower\u2019s income and credit history<\/p>\n\n\n\n

Fixed interest rate \u2013 In this case, the home loan interest rate remains the same over the complete loan period<\/p>\n\n\n\n

Floating interest rate \u2013 In this case, the home loan interest rate<\/a> fluctuates periodically over the loan period and the lender revises it from time to time<\/p>\n\n\n\n

EMI \u2013 Equated Monthly Instalment, or EMI implies the monthly payment the borrower will have to make every month for repaying the loan. It is comprised of the principal as well as interest component. This is one of the most crucial factors for a borrower to consider. <\/p>\n\n\n\n

Credit score<\/a> \u2013 The credit score determines the creditworthiness of the prospective borrower. It denotes past credit history, earning ability and denotes whether the person is a worthwhile prospect. Banks generally lend to borrowers who have a credit score higher than 750<\/p>\n\n\n\n

Processing fee \u2013 This is the amount paid to the lender at the time of applying for the loan. It may be a percentage of the loan amount. Essentially, it is like an advance<\/p>\n\n\n\n

Default definition \u2013 The definition of default may include not just non-payment of an EMI, but also non-fulfilment of a number of other terms initially agreed upon. For example, if the loan was a joint loan taken by a married couple who have now divorced, it may constitute a default. It is important for the borrower to be clear on what constitutes a default in the home loan agreement<\/p>\n\n\n\n

Amendment clause \u2013 The amendment clause allows the lender to change the terms and conditions of the original loan agreement at any time without the borrower\u2019s consent. You can imagine how this would disadvantage the borrower. In such cases, the original mutually signed document stands worthless. The borrower must specify that his written consent is needed before the lender can make any amendments <\/p>\n\n\n\n

Repayment clause \u2013 The borrower should ensure that the home loan<\/a> agreement allows prepayment of the loan amount without any pre-closure penalties. Prepayment can save the borrower a considerable amount over the long run <\/p>\n\n\n\n

Factors which affect a borrower\u2019s eligibility for a home loan<\/strong><\/p>\n\n\n\n