Home loans can make owning a home possible for many people, but if not managed properly, they can become a big problem. Over the last 10 months, home loan interest rates have increased aggressively, making it expensive for borrowers. Here are eight things you should know before taking out a home loan.
1. Floating interest rate: Opting for a floating interest rate on your home loan can provide you with the lowest interest rate, but it comes with the risk of paying more interest during increasing interest rates.
2. Interest may increase further: With home loan interest rates having already increased by 2.5 per cent in the last 10 months, it's expected that the increase may continue.
3. Variation during long-term loans: Home loans are taken for a long-term, so it's important to consider the economy and other factors that may result in fluctuations in interest rates.
4. Don't take a loan based on interest: Don't take a home loan solely based on low or high interest rates, as fluctuations can occur for a long time. Instead, consider your situation.
5. Keep in mind the rising interest rate: Prepare for a possible increase in interest rates if you plan to take out a home loan.
6. Don't extend the tenure: Some experts recommend keeping the tenure of the home loan the same even if the interest rate increases. This way, you can repay the loan sooner.
7. Select the prepayment option: Choosing the prepayment option can help you complete your home loan sooner.
8. Take advantage of a better credit score: If you have a good credit score, you can appeal to your bank for a discounted interest rate.
Owning a home is a dream for many, but it's important to consider all the factors and make an informed decision before taking out a home loan.
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