he following ten terminology related to home loans are important to understand before applying for one:

 

 

1. EMI: This is the term you will hear most frequently when taking out a loan. Equated Monthly Installments, or EMIs for short, are the monthly payments you make to the bank to pay back the loan. The borrower is aware of it before to accepting the loan because it has been pre-calculated. EMI is determined by taking into account the loan amount, interest rate that applies, and loan term.

 

2. Down payment or margin: When purchasing a home, the loan amount approved by the banks often represents 70–80% of the property's value. The borrower is responsible for setting up the remainder. For example, let's say your bank approves a home loan for Rs. 40 lac and you want to purchase a property worth Rs. 50 lakh. The down payment, also referred to as the margin, is the remaining 20% that you are responsible for arranging.

 

3. Resale: Referring to homes that were not purchased straight from builders but rather were previously held by another party, this word is utilized.

 

4. Evaluation of Credit: The bank verifies the borrower's ability to repay the loan before authorizing it by looking at a number of factors. To prevent the chance of default, they include verifying information on assets and liabilities, employer, age, savings, income, and other details. Credit evaluation is the process of confirming repayment capacity.

 

5. Pre-approved Real Estate: Banks confirm properties qualified for a mortgage. A few builders have banks perform this sanity check in order to market their house for sale. A pre-approved home is not always 100% safe, therefore research is necessary before investing.

 

6. Security/collateral: In order to guarantee the ability to repay, the bank may occasionally require collateral, often known as an asset. In the event of a default, the amount will be retrieved using this asset.

 

7. Post-dated Cheque PDCs: Post-dated checks are a series of checks that the borrower issues and can be used to withdraw EMIs in the form of ECS for a maximum of one to two years. These checks have a future date on them, and they might be paid on that day.

 

8. Sanction Letter: This document certifies that the loan has been approved. The applicant's eligibility for the loan as well as other loan-related information, such as the loan amount, interest rate, tenure, and monthly payments, are confirmed by the sanction letter. Even after granting the loan sanction letter for property-related or other reasons, a bank retains the authority to terminate the loan.

 

9. Mode of Disbursement: After the bank completes the necessary legal work and verification, it consents to release the loan balance. Three methods could be used to disburse loans:

 

Advance: When the bank gives the borrower the full loan amount before construction is finished. It's referred to as advance payment.

Partial: The term "partial disbursement" refers to a loan that disburses some of the total amount before construction is finished and the remaining portion after construction is finished.

Complete: The term "full" refers to the disbursement of the complete loan amount following the completion of construction.

 

10. Pre-EMI: This is the interest amount you pay before the entire loan amount is disbursed. Click this link to learn the distinction between EMI and Pre-EMI.

 

If you are familiar with the terminology listed above, you are a well-informed person who can easily search for a reliable home loan partner to help you achieve your dream of owning a home.