While taking a home loan and choosing an apt lender, you need to have a clear idea of what you are getting into. You therefore need to ask a whole host of questions to comprehend the structure of the loan, the costs involved and the benefits you can get. The following are some relevant questions you must ask your lender:
Ask your lender what exactly goes into the calculation of a loan and eligibility of an individual to avail of one. The standard thing that all lenders say that you are eligible for a loan that is up to 60 times of your net income per month. The bank also looks at your existing commitments and subtracts this amount to arrive at your net available income. However, banks do not include things such a medical allowance or a leave allowance while calculating your net disposable income each month. You therefore need to understand what exactly the lender is taking into consideration while deciding your eligibility.
While shopping for the best home loan, you will need to compare all the prices that different lenders are offering you. Be aware of the fact that different lenders can have a higher charge for the same kind of home loan product, because it may have a higher processing fee. Make sure you ask your lender about all the different fee components such as application fee, processing fee, documentation fee, administrative charges, etc. These fees can be negotiable and can bring down your overall costs.
You may be aware that there are two main types of interest rates that are offered to borrowers. The first is a fixed interest rate, and the second is a floating interest rate. However, there are several variations and sub-variations in interest rates called hybrid interest rates of home loans today. If you are a first time borrower, it makes sense to discuss all the available options on the interest rates that a bank is offering and working out what is best suited to your risk profile.
This is an often neglected and important part of the interest rate on your home loan. The annual percentage rate or APR takes into account not only the pure interest rate that the bank is charging you, but also the other fees and charges that are expressed as a yearly rate. This reveals the true cost you have to bear and thus the lender is obligated to show you this information if you make a request for the same.
While most banks will try to woo you as a prospective customer, and do their best to avoid this question, make sure you have a clear idea about the charges you will have to cough up in case you decide to close your loan ahead of its tenure. Even though RBI in June 2012 had mandated Banks not charge pre-payment penalties on floating rate home loans, it is better to verify the same with the lenders.
Additionally, you can ask your lender questions such as whether or not there will be someone available to answer your additional questions while you are servicing the loan and what are the checks and balances that the lender has put in place to keep your personal information secure? When you are taking a home loan, you are getting into a long term commitment with your lender, so do clear all your doubts, before you sign a final agreement.