Home loans often make it easier to buy the house of your dreams. Thanks to these loan offerings, you need not exhaust your lifelong savings or bear the pressure of paying the entire cost of the house all at once. Moreover, with the availability of an online interface, it is no longer a taxing task to avail a loan for your house. You can apply for a home loan online within the comforts of your home. However, there are certain things that you must keep in mind before applying for it.


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  • Interest rates

There are two types of home loan interest rates - fixed and floating. The choice between the two can significantly impact your total finances. Floating interest rates are pegged to Reserve Bank of India’s benchmark rate and can vary during the tenure. Whereas fixed interest rates are constant throughout the tenure. You must know that fixed interest rates are comparatively few points higher than the floating rate. You can choose a fixed interest when you anticipate an increase in market interest rates and want a fixed EMI for the tenure. Whereas, it is preferred to opt for a floating home loan interest rate for long tenures.


  • Credit score

For a home loan, a credit score above 700 is considered ideal. You must check your credit score and ensure that it is healthy before you apply. You should also strive to clear all your dues and look for ways to maintain and improve your credit score a few months before applying.


  • Associated Charges

There are various charges associated with a home loan. Though almost all lenders charge processing fees, you can negotiate with them to reduce it. You must also inquire about other charges like prepayment fee, operation fee, late payment fee etc. While you sign the loan agreement, you must discuss these charges with the lender and ensure that you are not wrongly charged.


  • Fine print

Your loan agreement contains all the details, terms, and conditions of your home loan. Therefore, you must read it carefully. You must closely study every aspect of the agreement and ask the lender in case of any doubts. Once you sign below the dotted lines, it would be difficult to make any changes to your loan agreement.


  • Optimal tenure

It is crucial to choose an optimal tenure that is financially viable for you. If you choose a long tenure, it would increase your interest outgo and the cost of borrowing. Similarly, if you opt for a short tenure, it would help you pay off the loan faster but could put unnecessary pressure on your daily finances. You can know your home loan EMI and check your affordability through an EMI calculator. 


Before you apply for a home loan, check your eligibility from the lender’s website and ensure that you meet them all to avoid rejections. In addition, you must have the updated documents ready with the application form. Fill the application form carefully without making any clerical mistakes and ensure that you take a loan amount that you can comfortably repay.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.