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Acquiring a home is a monumental milestone, often accompanied by the necessity of a home loan. However, homeownership’s joy sometimes leads to overlooking crucial details within the loan agreement. While interest rates, down payments, and EMIs are primary considerations, comprehending the loan agreement is equally imperative. This agreement, which is binding throughout the loan tenure, demands a thorough understanding of its clauses.
KEY ASPECTS IN YOUR HOME LOAN AGREEMENT
- Security Cover Clause: This clause requires that the security provided, typically the property being purchased, adequately covers the loan. If the security is deemed insufficient, the lender may require additional security to safeguard the outstanding loan amount.
- Setting Off Other Balances: Before applying to the EMI or principal, the customer’s payments are first allocated to other outstanding dues, such as penal interest or fees.
- Assignment to Third Parties: The lender reserves the right to assign the home loan to a third party, either in case of default or for business reasons. The terms and obligations of the loan remain unchanged and transferred to the assigned third party.
- Prepayment Clause: This clause outlines the conditions and implications of making repayments in excess of the EMI obligations, known as prepayment. It specifies the method for making prepayments and outlines their financial implications.
- Notification Clause: The customer must promptly notify the lender of any changes in employment, income levels, address, or residential status. This clause delineates the timeframe and mode of notifying such changes.
- Definition of Default: Failure to meet repayment obligations constitutes default, as outlined in this clause along with its implications.
- Amendment Clause: This clause governs amendments to the home loan agreement, specifying the process, timing, and parties involved. It delineates the rights and obligations of each party in such circumstances.
CONCLUSION
The home loan agreement serves as the foundation of your loan, dictating its terms and conditions. Before availing a home loan, it is imperative to thoroughly review and understand the agreement. Seek clarification from your lender or professional assistance if necessary. While certain terms are negotiable, others require a critical examination before signing. Being well-informed before committing to the terms outlined in the agreement is crucial.
Additional Readings:
GUIDE TO HOME LOAN APPLICATION
TOP PICKS FOR HOME LOAN IN INDIA