As an engineer, you know the value of having a self-owned house. Apart from providing a roof over your head, it reflects a feeling of pride and accomplishment. It might be your long-fetched dream to purchase your own home and live in it along with your family.
And to realize this dream for engineering professionals like you, many banks and non-banking financial institutions have started offering professional loans for engineers. However, if not managed properly, the process can turn into a nightmare for you since a home loan usually has a very long tenor and involves an enormous amount.
Thus, you need to be aware of certain factors while availing these loans to ensure your home-buying experience is smooth and hassle-free. While applying for a home loan for engineers, here are a few common mistakes that you should avoid:
1. Applying for a bigger loan amount than what you can repay
Applying for a bigger loan amount than your repayment capabilities can land you in deep trouble. It can cause your financial life to go haywire. If you’re unable to repay the loans in time, your house, which is kept as a mortgage for home loans, might be taken over by the lender to recover the debt.
Hence, while financing your home, evaluate your current financial situation carefully. Consider other loans or EMIs that you are paying before determining your home loan amount. Ideally, your EMI outflow should not be more than 30 to 40 percent of your net income.
Do not apply for a bigger loan with higher EMIs, on the premise that you are due for an increment in the upcoming months. If the increment is lower than expected, or you incur additional expenses, you may land in a fix.
2. Not comparing the interest rates offered by various lenders
Applying for professional loans without comparing interest rates from various lenders can be a silly idea. You might just end up paying a lot more as your interest outgo than what you should be paying ideally. Thus, it’s always wise to consider loan offering from various lending institutions and compare them side by side to make an informed decision.
Nowadays, there are many websites, which allow you to compare engineer loan interest rates from various banks and NBFCs. It also enables to look out for extra charges on loan offerings such as processing fees, prepayment penalty, administrative charges etc. You should avail this facility to avoid selecting the wrong loan product and ensure greater savings.
3. Signing the home loan agreement without reading the fine print
Experts point out that the fine print of a home loan agreement contains the essential clauses about the loan and most of the home buyers, including engineers ignore reading it. It may look easy now but you may end up paying a hefty price later for this oversight as it contains critical information such as repayment rules, applicable penalties, hidden charges, and other terms and conditions.
You must always read the fine print carefully and make sure everything mentioned in it is appropriate before signing the home loan agreement. Otherwise, ask for clarity from the lender or request essential changes if you find anything unruly.
4. Opting out of insurance coverage
Opting out of insurance cover to mitigate the risks associated with your home loan can be a costly mistake. In case of an unforeseen contingency in future such as illness, death, accident, or any kind of adversity that affects your capability to repay the outstanding EMIs, the home loan insurance can come to your rescue by aiding you or your family to clear off the pending dues.
Hence, it’s strictly advisable for home loan borrowers to take appropriate insurance cover to protect their loved ones from any financial distress in future. Additionally, you can also include a life insurance rider in your home loan insurance policy, which will help your family members to survive and live comfortably in case of your unexpected death.
Avoiding the above mistakes can certainly make your home-buying experience a pleasurable one by preventing any future hassles. It’s prudent to compare various loan options available in the market and select the best one as per your needs and demands.