Basics about Home Loan Agreement

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A successful home loan agreement enables you to buy the home you have always wanted without having to stay for a long time before you can save up enough capital to make the complete payment. You can get a home loan for sometimes, indeed, 90 percent of the requested value of the property under consideration. Before you can get a home loan, you need to sign a home loan agreement. This document contains tenure-term stipulations under which you're agreeing to get the loan and the creditor is agreeing to pay. The contract is to be inked by all the involved stakeholders; dereliction instructions may be included in a home loan agreement. It also tells you how important interest you are going to have to pay for the home loan you're taking out. However, these conditions are mentioned in the home loan agreement. It's important that you read the home loan agreement word for word. However, it's advised that you sit down with someone who knows what your home loan agreement means and also explains it to you in a way you can understand. If you guess you cannot decide the legalese included in the home loan agreement, never sign a home loan agreement that you don’t comprehend or don't agree to. Important clauses to know about before signing a home loan agreement: The borrowers consider simple aspects of taking a home loan analogous to the down payment or how important the equated monthly installment (EMI), the term, and the interest rate being charged by the creditor are. Although they are the primary aspects of taking a home loan, there are multitudinous clauses, terms, and conditions that may impact how much capital you eventually pay. You gain or lose from the home loan agreement based on how long you pay it.

How they define “dereliction” in the home loan agreement

When a borrower fails to pay an EMI or multiple EMIs, they underpay. Occasionally, a borrower is unfit to pay the EMI due to a pending case of action. However, what happens to the loan? Occasionally, both husband and wife apply for a home loan, and they also get disassociated if the borrower dies. How will that be treated by all the complex parties? Make sure you know and understand how “dereliction” is defined within your home loan agreement.

Prepayment and foreclosure clauses

Sometimes you want to pay more on your EMI (in addition to the down payment that you made) because you have some spare cash. You would like to reduce your term or the EMIs you’re paying. Some creditors have no problem with prepayment, but some may impose a fine, which should include in the home loan agreement's terms and conditions. The same goes for home loan foreclosure. What if you want to pay off the entire debt in one lump-sum payment? If you imagine such a possibility, make sure that the provision is there in your home loan agreement.

Advertisement clause

Lots of clauses in the home loan agreement are drawn up based on how important the payment is, where you live, and what type of job you’re doing. These factors may change in the future. You may earn more or less. You may move to another municipality or you may get promoted (or downgraded). Some home loan agreements specify that you notify your creditor when these developments occur. However, it can attract penalties if you don’t notify them. Thus, if similar clauses are present in your home loan agreement, pay attention to them so that you can decide whether you want to comply with them or not.

The clause about fixed or floating interest rates

Once you get the loan you can decide which loan you want to pay a fixed interest rate or a floating interest rate. With a fixed interest rate, you pay the same EMI throughout the term. In a floating interest rate environment, the amount of EMI you compensate depends on the request conditions and the interest rate set by the RBI. Some clauses in your home loan agreement allow you to change the nature of the interest rate on certain conditions, and this can impact not just your EMIs but also how much you pay back. However, take it up with the representative if you don’t want this to appear in your home loan agreement.

Handling changeable circumstances

Although in India this term is not used much, many are familiar with “force majeure”, which means circumstances that cannot be anticipated or controlled. The term became especially popular during the epidemic because nothing could have predicted it. All requests and sectors had come to an impasse. Businesses closed. Multitudinous people lost their sources of income. Also, there can be a natural catastrophe. There can be unanticipated political or social upheaval. 

Conclusion

Going through multiple home loan agreements may feel like a laborious undertaking, but flash back to when you signed the agreement and took the loan. You will be paying EMIs and making other known and unknown payments for many years, indeed multiple decades Therefore, spending numerous days digging through the documents and completely understanding them can save you from unpleasant surprises, penalties, and spare payments.