Before the home loan amount gets sanctioned, the borrower and lenders enter a deal which requires their signature and execution. The loan agreement speaks loudly of the facility provided by the lenders and the creation of the mortgage on the home. They are typically in favour of the lender. Although it is a mere formality, the loan agreement is the most crucial document which contains the rights and liabilities of the buyers.
Some of the house loan clauses buyers should be aware of before they hurt you –
Amendments to the agreement: They are dangerous and are totally against the interests of the borrowers. If alterations in the agreement are allowed, the lenders can tweak the policies during repayment of the credit. The borrower must ensure there is written consent provided to alter any terms on the agreement.
Fluctuating interest rates: It empowers the lenders to change the interest rates owing to the fluctuations of the base rate. It allows lenders to increase interest rates in the future when the market suffers ups and downs. Due to these reasons, fixed rates get converted to floating rates. Hence, the borrower must carefully read the agreement and make sure the home loan interest rates are according to the negotiated terms, which should be part of the agreement.
Income and employment: You must send your income statement to the lenders every month the moment you begin with home loan repayment. In case you quit your job anytime then the amount you receive as a final sum should be used for settling the credit. You can use the balance amount for personal use. Also, if you switch to a new job, keep the lenders on loop.
Risks and insurance: You must assure the lender that the desired property is risk-free from human-made and natural calamities such as terrorism, rains, storms, etc. Also, home loan in India come with insurance facility. This is because if the borrower dies owing to unexpected scenarios, the outstanding will not fall as a burden on the family members. This should be part of the agreement.
Payments and charges: The interest rates are not the only amount you pay towards the loan. There are other penalties and fees included when you avail of the credit such documentation charges, loan handling costs, processing fees, etc. Then you pre-closure and foreclosure fees in place as well. The lenders must make sure to mention those charges in the agreement as sometimes they hide it from the buyers.
Interest rates: When lenders offer you a home loan, they are of two types – floating and fixed rates. The floating prices are subject to fluctuation owing to market and economic conditions. However, fixed rates remain the same during the entire loan tenure. You may opt for the fixed one as your financial planning becomes easier. But the lenders could mention on the agreement as floating rates, which could spoil your entire financial strategy. Therefore, check on interest rates factors as well.