Buying a dream house is a lifetime investment. This is what makes people choose the best possible property according to their budgetary as well as other requirements. With a view to providing financial aid to the prospective homebuyers, several banks offer their respective home loan agreements with some essential clauses to be followed.
The loan agreements come with various repayment options, which a home buyer can choose according to his/her convenience of paying back. Of course, the installment provisions make it easier for you to purchase your dream house but then it needs a bit of carefulness from your side before you sign the loan agreements.
Before you put your signature on the home loan agreement, ensure going through all the provisions mentioned in the document. Being the authorized signatory, it is expected that you have complete knowledge of what you’re signing.
This is a clause that lets you permit the bank to alter interest rates on the basis of the fluctuation in the base rate. When you sign the agreement, you agree to this clause of variation in the interest rates. Borrowing a home loan from banks is a long-term association, and hence the bank makes sure it is free to change the rate of interest without having to seek customer’s permission.
The banks may keep a prepayment clause for homebuyers to make sure borrowers pay the loan amount early. Prepayment is the term that refers to making an advance payment of either the whole outstanding loan amount or a part of it to minimize the borrower’s liability. While going through the loan agreement, it is recommended that you go through the prepayment clause, if any, put forth by your bank.
In case, there is that clause, make sure there are no implications concerned with it. Don’t forget to check if your bank has specified any amount as the prepayment amount for the outstanding loan.
This is one of the most important clauses that you need to go through before you sign your home loan agreement. With this clause, your bank reserves the right to share your personal details with a third-party to ensure collection of loans in some cases. They may ask third-party collectors to recover the investment in case you become a defaulter, and that too without seeking your permission.
“The bank may assign any of its rights or obligations herein without any approval or consent of the borrower,” the statement concerned with the clause may appear something like this one.
Make sure no clause asks borrowers to allow the bank to introduce changes as and when required without seeking their permission. A home loan or any loan agreement is signed by both the parties involved only after they agree to all given the terms and conditions of the document. Making changes or amending the deal will mean breaching the trust.
An Event of Default can be any event that may lead to borrowers being defaulters. Go through the clause properly. It is yet another grave point to consider. The significant events that may bring the borrowers into default can fall into categories like Cross Default, Breach of the Loan Agreement, Non-Payment, and Insolvency.
Home loans can be secured loans or unsecured loans depending on the provisions set by the banks you’re taking the loans from. Your loan agreement will tell you if the credit to be considered is a secured or unsecured loan. If it’s a secured loan, the clause will specify the cover to be provided against the investment for a particular tenure. It is, of course, undeniable that the property for which you’re taking the loan will be the security against that amount.
Be careful about this clause. It may ask you, the borrower, to notify your bank about the change in your personal or professional status well in advance. However, sometimes informing in advance is not applicable in some scenarios. Try to amend the same and mutually decide on it before signing the agreement.
The default is the term that defines the non-payment of EMI. However, the word can have different meanings for different financial institutions. It is expected that you clarify the definition of the term with your bank. For many banks, default defines litigation on the borrower or the death of the borrowers, etc. The default clause may also be for couples who were the nominees but are divorced.
When it comes to home loan agreements and its essential clauses, you can trust real estate ace Oswal Group. The agents verified by the real estate giant make sure home buyers are well aware of all the provisions of the agreement beforehand. This ensures you sign a proper document and enjoy a stress-free living in your house. The Oswal representatives bridge up the gap between you and the banking institution that will offer you the home loan for their housing projects.
Trust them and have a happy life!