Things that Your Banker May not tell you about your Home Loan

Most of us do not understand how a home loan works. We know that there are hidden charges and fees and that we land up paying a massive amount towards interest. Apart from this, there are many other things about your home loan that your banker does not wish to tell you. Though banks these days focus on being transparent, there are a few information that they do not discuss openly. Some of them are as follows:

• Front Loading Method: As soon as your home loan is processed and you start paying your Equated Monthly Installments (EMI), you may think that you have started repaying your home loan. However, under the Front Loading method, for the first few years, your EMIs are posted towards your interest rate and not the principal amount. None of the banks will have an open conversation with you regarding how your payments are posted. By posting your EMIs towards the interest rate, the banks make profits as home loans usually come with longer loan tenure.
• Banks have some Preferences when it comes to your Occupation: Your occupation is one of the important factors that affect your home loan. Though you may think that you are in decent, high paying job, the banks may not prefer your occupation. Generally, banks prefer government employees over people working in private sectors as their jobs are comparatively stable. They also prefer doctors, engineers, lawyers, and other white collar jobs.
• Your Employer Matters: Did you know that banks have categorized employers into different grades? Most of the popular companies like the TATAs and Hyundai fall under the top category and many small startups and small companies fall under a lower category. If you are employed by an employer who falls under the lowest category, your loan application may be rejected. If your employer has a history of not paying salary on time and downsizing the number of employees working with them, you will not be considered as a strong applicant.
• The Location of your Property is Important to the Bank as well: Banks consider the location of the property when you apply for a home loan. Most lenders prefer properties that are located within the city limits and in a prime location so that the appreciation cost of the property is high. In case you default on your loan, the bank will be in a situation to sell the foreclosed property at a higher cost and manage their expenses. They do not prefer properties in other cities and in remote places.
• Banks care about the money you are left with after paying your EMIs: You would have noticed banks asking you for information about your existing loans, credit card bills, and other monthly expenses. This is because the banks want you to have surplus money after you pay all your bills. If you are financially burdened every month and are barely making your ends meet, chances are that you will default on your loan easily. For this reason, banks make sure that you are financially independent after paying your home loan EMIs.
• Ready-to-move Houses versus Under-Construction Houses: When considering your home loan application, banks note the type of the house you want to buy if your loan is sanctioned. A ready-to-move house is preferred as an under-construction house is usually risky as the builders can delay the deadline and fail to give you the keys to the house as promised.
• Adding your Spouse as a Co-Applicant makes you look responsible: Having your spouse as your co-applicant not only increases your monthly income and the loan amount but it makes you look responsible in the lender’s eyes. It increases the stability factor and builds your credibility.

There are many other home loan charges and fees your banker does not want to tell you about. If you are planning on buying a house, check for these hidden messages before signing a home loan agreement.