All About Home Loan Agreement
Home Loans make it comfortable for you to advance in as soon as possible without breaking your bank and upsetting the budget. ‘Look before you Leap’ is the strategical rule of thumb whilst shopping for the home loans and narrowing down on the best. A little ignorance in home loan agreement can bring nasty surprises later.
Most of us see the home loan agreement as a mere formality. Well! That can be the biggest pitfall. It is a contract twisted towards the lenders through different legal clauses presented in the fine quality paper. Let us help you to scout among these legal tactics thereby making the agreement easier for you to understand.
Outlined below are some of the clauses that you must check in detail before signing the agreement:
- Reset Clause on the Fixed Rates: Many home loan borrowers are nowadays seen to go with fixed rate loan. The Home Loan Interest Rate surge is the obvious reason
behind their choice. In spite of being a fixed interest rate, the latter is not locked at a specific percent for the entire tenure. Here is what a reset clause introduced by banks in their home loan agreement says, which allows the lender to modify the interest rate in the future. The clause is applicable to fixed rate home loans as well. Don’t let yourself be tricked by the term ‘fixed rate’. For that reason, it is significantly important to go through the contents of your home loan agreement metriculously.
Force Majeure Clause: This clause allows the banks and Housing Finance Companies to unfix the interest rate on loan and increase it under exceptional circumstances. And, what are those circumstances is certainly difficult to differentiate. It will help you to prevent falling for semi fixed-rate loans that are often advertised as fixed-rate loans.
Security cover at the time of falling property rates: Despite paying your Equated Monthly Installments (EMIs) on time, you may be asked to provide security over and above your Home Loan. That is usually what banks and Housing Finance companies do when properties witness a fall in rates.
The clause that gives such a power in hands of banks reads: The bank may declare all sums outstanding under the home loan (including the principal, interest, charges, expenses) to become due and payable forthwith if the value of the property or any security (including guarantees) created or tendered by the borrower, in the sole discretion and decision of the bank, depreciates entitling the bank to call for further security and the borrower fails to give additional security.’
The bank or Housing finance companies can consider you a defaulter or raising an error if you do not give the additional security as demanded.
You should not take the things for granted. Always ask the banks to make you understand your agreement before you sign it. Also, ensure to bring these uneven and twisted clauses to the notice of your housing finance company and suggest the changes.
Leading Home Loan Providers (Click to Apply)
- Axis Bank Home Loan
- ICICI Bank Home Loan
- PNB Home Loan
- HDFC Bank Home Loan
- SBI Home Loan
- CitiBank Home Loan
- Bank of Baroda Home Loan
- Allahabad Bank Home Loan
- BOI Home Loan
- Andhra Bank Home Loan
- Other Banks
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