Important decisions like taking a loan should be made only after due consideration of all facts. As a customer, you need to be aware of the various schemes and offers available in the market to make an informed decision.
An essential step in mortgage loan shopping is asking your lenders the right questions. This way, you can equip yourself with the requisite knowledge to bargain better terms on your loan.
Not sure what questions to ask? We have you covered. Here’s a list of questions you can start with.
7 Important Questions to Ask your Mortgage Lender
1. What Types of Loans Do you Offer?
There are various types of mortgage loan schemes available in India. Some popular ones include simple mortgage loans, conditional mortgage loans, usufructuary mortgages, subprime mortgages, fixed-rate mortgages, adjustable rate mortgages, etc.
Ask your lender about the benefits and drawbacks of each type and choose the one that best caters to your needs.
2. What Interest Rate is Offered on the Loan?
Even a tiny difference in your mortgage loan interest rate can significantly impact your monthly EMI and the overall interest expense. So do inquire about your annual percentage rate (APR) and the factors considered while determining it.
You must be clear about the various interest rate options (fixed or floating) available. Floating rate loans are usually cheaper than fixed-rate loans. With it, you also get the option to prepay your loan without any charges.
However, if you do not want any surprise change in your interest rate during the loan tenure, you can opt for fixed-rate loans instead.
3. How Much Down Payment do I Need to Make?
Most lenders will require you to pay at least 20% of the property’s purchase price as a down payment.
A higher down payment reduces your outstanding balance and keeps the EMI low. Further, it can also help you land lower interest rate offers.
However, you should be able to arrange the sum at the beginning of the loan tenure.
4. What Documents Are Require to Process the Loan?
You will need to provide documents to the lender that will help them gauge your creditworthiness and repayment capacity.
While the requirement may differ from lender to lender, the basic ones include personal identity documents, proof of income, salary statements, credit history, statement of assets and liabilities, etc.
Keeping these documents ready will accelerate the loan approval process.
5. Can I add a co-applicant to my mortgage loan?
One way of increasing the loan limit is by adding a co-applicant to your loan.
You can have your close family members such as your spouse, parents, sons, or unmarried daughter share the loan burden with you. You can also add their income if you’re singularly not able to meet their eligibility criteria.
So ask the lenders if that option is available in their mortgage loan product.
6. Are there any tax benefits of availing of the loan?
Mortgage loan in the form of home loans offers tax advantages to borrowers. The borrower can deduct the interest as well as principal repayment from his taxable income under sec 24 of the Income Tax Act and reduce his tax liability.
Even if your property is under construction, you can claim the benefits of interest paid during the construction phase. Be aware of all the tax benefits so you can take advantage of them same.
7. What Other Charges Do I Need to Pay?
Interest is not the sole cost of borrowing funds. For instance, mortgage loans also come with additional charges such as processing fees that range between 0.5 to 2% of the loan amount.
You may also be required to bear inspection fees, legal assessment fees, stamp duty charges, documentation fees, late payment fees, cheque bounce penalties, etc.
Have a clear idea of all charges involved in your mortgage loan to avoid any rude shocks later on.
Hopefully, now you’ve got some basic information to kick-start your mortgage loan shopping process. Remember that a mortgage loan is a long-term commitment. So ensure you’re in with the right product and a suitable partner.