Owning a house has always been the most important material ambition for everyone. This is not a recent phenomenon and has been a part and parcel of the human history all through the ages.
Today, buying a house as many advantages to offer. It allows you to build equity, while you pay the mortgage amount every month. It is considered to be a much wiser option than paying rent for the same house though it may work out a bit more expensive at times. Today, financing your house through a bank can earn you many benefits in terms of financial savings. To plan your house possession and financing is today considered to be a major step towards ensuring long-term sound financial health of an individual.
While going for a house, you have to be sure as to how much you can afford to buy a house. While everyone would like to buy the house that would be big, spacious, luxurious well located and comfortable, the obvious point of cost goes against all this and pulls you down the other way.
The factors that are to be considered before settling down on the house you are going to buy are many like how much is the down payment, the mortgage or equal monthly installment you can afford, the taxes you have to shell out on one time and regular basis, the trend of the property prices in the area you are purchasing, and the net tax savings on your income tax vis-à-vis your income and tax profile.
The basics of house finance are almost always the same. The housing loan approved by the bank further to verification a whole lot documents. These include the land legal papers, the plan of the house being constructed, the estimate of the architect and most importantly, your income statement. After these are submitted to the bank, the bank scrutinizes the documents and approves the amount of housing loan that is to be paid to the individual.
This amount is generally paid to the client on different installments. This is done in four times generally and can be paid in more or less numbers on case-to-case basis. The last installment is paid on completion of the construction after the site is inspected and verified by the bank authorities.
Once the amount is paid to the client in full, the bank starts crediting the repayment from the individual. This is done in the form of EMIs or equal monthly installments, and is paid once a month by the client to the bank. The EMI generally comprises of the interest portion and the principal portion. The interest portion is proportional to the pending principal amount to be repaid to the bank. The rate is predefined and is always mentioned in the loan agreement form.
The rate of interest can be fixed or floating. In the floating interest, the rate of interest can be modified by the bank as per the prevailing trend of interest in the market during the course of time the amount is repaid by the client. The fixed interest rate usually does not change with time and is generally higher than the floating rate at any point while individuals apply for loans.
The availability of money for the common man in the form of housing loan has created a revolution of sorts for the house building industry. This has been catalyzed by the government’s support for these loans in terms of tax benefits, for the banks as well as the individuals who apply for these loans. No wonder why, these loans are still considered to be the cheapest loans available in market.
Without the housing finances available in the market today, and without the incentives the government gives to these loans, the number of homeless in the country would have risen in dangerous numbers. It is not very far when every citizen finds a roof over his head, thanks to the various housing finances and the low rates of interests available in the market.