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Home Loans - What To Keep In Mind After Your Loan Has Been Disbursed

Do you know what must you keep in mind after taking a home loan in order to avoid common mistakes? Are there any particular things that home loan borrowers should be aware of to avoid any pitfalls later? Here we give you some tips to keep in mind after you get your home loan.

1. Read loan agreements carefully: You need to read the loan agreements carefully as these include details on your rights and obligations towards the lender. Don't ignore understanding what responsibilities you have because later on you will not be able claim that no one told you about what happens in case of late payments or defaults. This doesn't mean you need to review the agreement the way a lawyer would, but at least understand at a high level what is going in the loan transaction.


2. Learn about the type of interest rate you are charged: Interest rates have a direct bearing on the EMI payments that you make. In case you are charged a floating rate of interest, any change in the interest rate will bring about a change in your EMI. In case you are charged a fixed rate of interest for an initial few years, and floating thereafter, you should ask yourself if you will still be able to afford to pay a higher EMI if the interest rate increases later in the loan. Therefore, understand how the type of interest rate you are charged might affect your loan and EMI. Further, if rates have gone down a lot since you got your loan, you might want to consider refinancing your loan if it makes economic sense to do that.


3. Know about the implications of delayed payments: A borrower who does not meet timely payments on a home loan might be charged certain penalty fees by the lender. The monthly payment has a due date, and frequent delayed payments are treated very unfavourably by the lender. Problems can occur when the payment is delayed by more than 15 days. The lender adds a late fee to the loan account, which has to be paid along with the late payment. In addition to paying these penalties, you might also be risking your credit history if you aren't disciplined about repaying your loan.


4. Learn about the prepayment and foreclosure charges: If you have excess capital (for example, through receipt of an annual bonus or an inheritance), and you want to settle the loan before its maturity, be aware that you might be charged a certain fee. Typically, lenders charge up to 1% to 2% as foreclosure charges, i.e., when you close the loan account before its actual maturity through repayment of the remaining amount or through a balance transfer to another lender. Most lenders do not charge any amount for partial prepayments of loans.

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