Most people dream of owning a home. However, be careful in making any choice in this regard and follow the right steps in your home buying process to make it a profitable proposition for yourself. Thus, do thorough research before you indulge yourself in any such purchases and get yourself the home of your dreams. You have to determine your budget and see how much you can comfortably pay from your pocket and how much you need to borrow. Once you figure out how much of loan you would require to purchase your chosen residential property, you have to search for the perfect residential property loan which is affordable and suits your requirement in a perfect manner.
When looking for a residential property loan, there are a lot of things to take into consideration. This is not about finding the cheapest available home loan rate but you should take certain other parameters into consideration while making the final decision. In this article, you will find a list of several crucial residential property loan factors which will help you choose the right residential property loan. Here is a checklist of the necessary factors that you should take into consideration when making a judicious choice of the best residential property loan.
Fixed vs. variable rate of interest:
One of the determining factors in making the right decision of choosing a home loan is whether the rate of interest is fixed or variable for a certain term. A variable interest rate is one which is dynamic in nature and keeps changing as per Reserve Bank decisions with regards to the national cash rate. A fixed rate, on the other hand, cannot be altered during any point during the loan repayment tenure. You have to pay the fixed amount on monthly, quarterly, or annual basis.
The term of the loan:
A shorter loan term will certainly require higher repayments but this will save you interest in the long term. Most of the borrowers have the flexibility to choose their loan terms. The usual residential property loan repayment tenure is somewhere between 15 and 20 years, and this can give you the required room to breathe throughout the tenure of the repayment years.
Early repayments:
During the tenure of the residential property loan, if you are fortunate enough to receive some excess savings due to less spending or salary boosts, then you can probably be able to pay off the loan earlier or make a big part payment in order to complete the repayment earlier. You should ideally choose a loan that allows you the flexibility of pre-closure and part-payment during the loan repayment tenure.
The frequency of repayment:
Depending on your income and lifestyle, you can certainly choose to repay your home loan in either monthly, fortnightly, or weekly installments. Choosing frequent repayments can save you some dollars every time, and you should judiciously choose a frequency that suits your needs so that there is no probability of missing a payment.
The line of credit:
This type of home loan allows you to use the equity of your home for other purposes. You should avoid the temptation of using this feature often; otherwise, you will end up extending your home loan even further.
Conclusion
Choosing the right residential property loan is a financial as well as a personal choice, depending on other essential factors as well. But you should make it a point to adhere to the home loan checklist jotted above. This would help you choose the right home loan as per your choice.