Ahmedabad, the largest city in the state of Gujrat, is the hub of commercial, administrative, and manufacturing industries of the state. This city has a bustling economy, with several textiles, pharmaceutical, and IT companies using it as the regional hub for their production.
Consequently, Ahmedabad is home to a growing number of individuals. Currently, there are more than 11 Lakh residents combining the metropolitan and urban centres of the city, creating a huge demand for basic services, amenities, and real estate.
The spike in demand for quality housing across Ahmedabad is largely due to its growing career prospects. A large number of individuals prefer to live near its metropolitan areas, as it eases the commute and offers better amenities. Moreover, the availability of a home loan in Ahmedabad has also boosted the number of prospective buyers of good quality residential property.
However, before a prospective applicant applies for a feature-rich home loan, he or she must ensure that they understand all the fine print associated with borrowing a credit. Home loans are long-term, secured credits, meaning the money is disbursed against a purchased property (which a borrower mortgages to the financial institution) and is repaid over a long tenor. There are several terms and clauses associated with lending that every borrower should be well aware of. Here is a brief guide on some of the most important of them.
- EMI –
Probably one of the most common terms associated with a home loan in Ahmedabad or any other part of the country, EMI, or Equated Monthly Instalment is a pre-determined amount that a borrower starts paying after the moratorium period.
EMI is made towards the repayment of the credit. It consists of 2 parts, payments made towards the principal amount and payments made towards the interest. EMI is calculated depending on several factors, loan amount, housing loan interest rate, tenor, and even credit score can determine the loan EMIs.
- Down payment –
Financial institutions do not offer the total cost of purchasing a property for individuals applying for a home loan. The disbursed credit usually ranges between 70% to 80% of the total cost of a property, and the borrower is liable to pay the rest. This amount is called down payment, or margin of a property loan.
The limit of margin may vary between financial institutions, which is why an applicant should carefully go through the details of every lender and select a home loan offer that meets their financial requirement.
- Security –
Security or collateral is the asset that is mortgaged against the loan amount while applying for credit. In most cases, the residential unit purchased with the home loan is signed as the mortgaged property to the lender. This is done to lower the risk associated with lending a significantly large sum to a borrower. In case he or she defaults on payments, borrowers can recover the outstanding amount by auctioning the purchased property.
The total loan amount can vary depending on the mortgaged asset. That’s why it is of utmost importance to ensure the property is of good condition, especially if someone is buying pre-fabricated units. Pre-purchase building inspections are a necessity in such cases.
- Sanction letter –
Sanction letter is the confirmation letter issued by the lender to inform that the credit request has been approved. It includes all the crucial details like rate of interest, tenor, EMI breakdown, etc. Lenders allocate sanction letters after completion of home loan online application and verification of submitted documents.
There are several other important terms associated with the lending process of a secured credit like a home loan. A borrower should do proper research to ensure they do not miss out on any critical clause while applying for a home loan in Ahmedabad.