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11 October 2010

The Right Amount to Apply for a Home Loan

Mrs Rizwana Mundewadi
We take a survey of different properties and flats, their areas, and rate per square feet in that area and are ready for applying for a loan. Getting a home loan may be the easiest step to fulfill our dream of a new home at the present time. Many institutions and private brokers lend money as loans for purchase of flats and also the procedure has been made quite easy. How can we come up with the figure of loan amount to be applied for. Will it be the total value of the flat or will we get the flat ownership by paying loan amount are few simple questions that we are unaware of. Usually we feel that we can apply for a loan and purchase a new flat, but this is not so.
Banks and financial institutions only give a certain percentage of the loan amount and not the total amount. Usually they may give maybe 70 to 80 percent sometimes even 90 percent considering your past financial record. The amount to be prepared for, prior to the application of loan, is termed as down payment which the purchaser has to pay before applying for a home loan. Deciding on the amount to be taken as loan is an important decision as the borrower will have to pay installments along with interest for certain period of years. Usually loan may be taken for twenty years or less so the individual must be prepared for having financial stability during later period of years. Always there is risk of losing job or death of a family member unexpectedly and the loan may have to be cancelled and property auctioned. But still it is worth taking the risk as no progress will be done without taking certain amount of risk.
It is advisable to pay larger amount as down payment and reduce the amount for loan as the interest charged by the financial institutions is more and the same property can be got at lesser price. It is of course true that only when not possible does the individual opt for taking a loan or if the benefits in other aspects like proving financial standing of the individual. Also if finances are arranged during the loan tenure than it is also possible to opt out from the loan by paying a small penalty fees along with the total amount.

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