Financial Guidance is Crucial When Hunting for a Real Estate

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What is an EMI? (Definition) 

EMI (Equated Monthly Instalment) is the monthly payment made to the lending institution, consisting of both principal and interest, until the loan is fully repaid.

What is the difference between Daily Reducing, Monthly Reducing, and Yearly Reducing?

Interest rates vary across institutions, typically ranging from 8.75% to 12%. Home loan interest is usually calculated on either a monthly reducing or yearly reducing balance, with some institutions also offering daily reducing interest.

Annual Reducing: The principal amount is reduced at the end of each year, meaning you continue to pay interest on a portion of the principal that has already been repaid.

Monthly Reducing: The principal reduces every month, resulting in lower interest payments over time compared to annual reducing.

Daily Reducing: The principal reduces daily as you make your payments, leading to the lowest interest outflow compared to the other methods.

What is a fixed rate of interest?

A fixed rate of interest remains constant throughout the loan term, meaning you won’t benefit from any decrease in market interest rates.

What is a floating rate?

A floating rate fluctuates with the market lending rates, which means your EMI could increase or decrease depending on changes in the lending rates.

What additional costs accompany a home loan?

Home loans typically come with the following extra costs:
Processing Charge: A fee charged by the lender when you apply for the loan. It may be a fixed amount or a percentage of the loan.
Prepayment Penalty: A charge levied when the loan is repaid before the end of the agreed tenure, usually around 2% of the pre-paid amount.
Miscellaneous Costs: Some lenders may charge fees for documentation or consultant services.

Are securities required for home loans?

In most cases, the property being purchased serves as the security, and is mortgaged until the loan is fully repaid. Some lenders may ask for additional security, such as life insurance policies or savings certificates.