Buying a house is a big move. But before you sign your bank home loan papers, you must
understand how to apply for a home loan and how the process works. You may be overlooking
some crucial aspects while applying for a bank home loan. It is important to be aware of these
avoidable mistakes, which can lead to long-term financial strain if neglected.
For this reason alone, we have listed and explained the five common mistakes to avoid when
you apply for a housing loan.
1. Not Understanding the Type of Interest Rate
When you apply for a home loan, you have two main interest rate options: fixed or floating.
Fixed-rate loans stay the same throughout your tenure. It is a great option if you prefer stability
and knowing how much you’ll pay monthly. On the other hand, floating-rate loans fluctuate with
market conditions. They can go up or down. So, you might start with a lower rate but it could
change later. Consequently, your EMI can decrease or increase.
Thus, it is best to think about your risk appetite, financial stability, and future plans before
deciding.
2. Focusing Only on Interest Rates
A mistake many people make is to think that interest rest is the only cost involved in their bank
home loans. However, there are other charges involved as well. These include:
- Processing fees
- Valuation fees
- Document verification fees
- Legal fees
These vary from lender to lender. Moreover, they can add up and affect the overall cost of the
loan if you’re not careful. Consequently, it is best to ask your lender to give you a full cost
breakdown when you apply for a housing loan.
3. Choosing the Wrong Loan Tenure
Most housing loans allow you to repay over 5 to 30 years. This may sound flexible at first.
However, it needs careful consideration. A longer tenure means a lower EMI. Although it seems
more manageable, it also means that:
- You’ll be paying more in interest over time.
- You’ll be in debt for longer.
-
Go for a longer tenure only if:
1. Your income is stable.
2. You’re okay paying more interest.
Otherwise, opt for a shorter term and become debt-free sooner.
4. Not Making a Higher Down Payment
Most lenders ask for 10% to 30% of the property’s value as a down payment. If you can manage
it, go higher than the minimum. It reduces:
- your loan amount
- EMIs
- interest burden over time
The more you pay upfront, the less you borrow and the less interest you pay in the long run.
5. Skipping Insurance Coverage
Another crucial mistake to avoid when you apply for a home loan is skipping insurance
coverage. In the unfortunate event of the borrower’s demise or critical events like disability or
terminal disease (per policy terms), the insurance policy covers your outstanding amount. It
protects your family and their financial stability.
Final Thoughts
Taking a housing loan is a long-term financial commitment that should be made after carefully
considering all aspects.
TJSB Bank’s housing loan allows you to take out loans of up to 300 lakhs. Additionally, they
offer zero prepayment charges and flexible loan repayment tenure of up to 240 months.
If you want to apply for a home loan, check all the details on our website, download the
application form, and meet our representatives at your nearest branch. We will walk you through
all the details and help you make the right choice.
