Home loan: Check these before you shop

Living in your own home is the dream of every household and interest rate is an important consideration in home buying decision. The Reserve Bank of India cut the rates for the first time in three years which has led the banks to announce a reduction in their lending rates. While you may be thinking to go ahead with your decision you deferred for a while, consider the following points to make the most out of your home purchase.

Bargain hard

While the property you select should be in the locality of your choice and should fit into your budget and considerations of— distance from kids school, distance from workplace— you must ideally look for a home that offers you possession at the earliest. This is important because if the builder makes you run around for two to three years then you may be burdened with dual expenditure of rental and your monthly EMI at the same time.

Experts also point out that the purchase at this time should be not for investment purpose but for your own residence. "It does not make sense at the current property prices along with ruling high rates to go for real estate investment," said Pankaj Mathpal, a CFP and MD of Optima Money Managers.

Downpayment

One you decide on the property, pay maximum amount possible as downpayment so that the interest burden is low. If you have fixed deposits that offer you around 9 per cent, break them and utilise it to increase your downpayment. It is not advisable to to earn interest of 9 per cent pre-tax on your investment and pay over 10 per cent on your home loan.

Floating rate

As of now the interest rates are at high levels (around 10.5 per cent) and if you take a fixed rate home loan then you would be locked-in at high rates for a long time and miss out on the benefits of fall in rates. Also the fixed rates come at a premium. Thus, you must go for a floating rate home loan

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