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Home Loan Agreement: Important Clauses That Borrowers Must be Aware of

By Finserv MARKETS - Dec 3,2019
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Home Loan Agreement Important Clauses You Must be Aware of

Owning a home is a big accomplishment and one has to strive hard to achieve this life goal. Buying a property is an expensive affair and this is where a home loan can help you realize your dreams. Various lenders offer great deals on home loans and opting for one will take you closer to your dream.

One thing that you need to be very careful about while applying for a loan is the agreement you sign with your lender. The agreement includes all the terms and conditions of the transaction and you need to abide by them. Being in a hurry to avail a home loan leaves open the possibility of overlooking some important clauses in the loan agreement. You must understand the agreement and its conditions clearly as it would make things clearer.

Let us take a closer look at some of the clauses which you need to be careful about when borrowing a home loan.

1. Alteration of fixed interest rate

Repaying the loan includes paying regular interest to the lender. These interest rates come in two variations: fixed and floating. The fixed interest rate option is a more appropriate choice as you do not have to pay a higher rate under any circumstances. The only way a lender can change this interest rate is if the banking regulator Reserve Bank of India (RBI) amends any norms. In case there is no such declaration, your lender is not allowed to make any changes to the fixed interest rate. Hence, you must keep an eye on this.

2. Prepayment

Repaying any loan is a long-term liability. So, if you are ever in a position to opt for prepayment of home loan, you should consider it. Most lenders allow you this facility but there can be different clauses associated with it. This is why you need to carefully check the loan agreement to know if your lender offers the prepayment option and if there are any pre-requisites to availing it.

3. Security cover

Before disbursing the loan, the lender will ask you to mortgage an asset as security. However, some assets might lose their value over time due to different conditions. Therefore, some lenders add a clause in the agreement that they can ask for additional securities, if needed, at any point in time. You need to be cautious about this clause and consider its particulars very carefully before agreeing to it.

4. Home loan balance transfer

The home loan balance transfer facility is one of the most important clauses you can find in the agreement. If you find a financial institution during the tenure of the loan that is offering a lower interest rate, you can transfer your remaining loan to them. However, before you do that, carefully read the original home loan agreement to find out if your lender provides this facility and check how much they charge for the same. You need to make sure that the transfer will benefit you in the long run. For e.g., At Finserv MARKETS you have the option for a Home Loan Balance Transfer facility. They offer interest rates starting at 8.55% p.a., apart from top-up loans of up to Rs. 50 lakh. This facility can help reduce your interest payouts and lower your EMI burden if you’re paying high-interest rate on your existing home loan.

5. Amendments in the Home loan agreement

When you sign the loan document and finalize the terms and conditions, it becomes an official, legal agreement between you and the lender. Hence, your lender is not allowed to make amendments in the document without your permission nor are you allowed to back down from the terms. Always check the clauses carefully to make sure that the lender does not have any such provision to do the same.

These clauses reveal the trustworthiness of a lender. Hence, you can use these clauses to determine which lending company is best for you.

Apply for a home loan at Finserv MARKETS and enjoy a loan amount of up to Rs 3.5 crore. Finserv MARKETS offers a loan for all kinds of financial needs at attractive rates of interest. You also get personalized pre-approved offers, instant approvals and negotiate the rate of interest or the tenure of the loan if you want an EMI that is convenient for you. Also before signing the loan agreement check whether you are also eligible for PMAY and if yes, you will be eligible for more reduction in your interest rates.

“Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App”.


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Bajaj Finserv Direct Limited ("BFDL") is primarily engaged in distribution of financial products and services through its digital platform (“Bajaj Finserv MARKETS”) and inter alia renders services of customer acquisition, providing preliminary credit support activities, fulfilment services and post-acquisition customer services to Banks, NBFCs, HFCs. BFDL is also a registered Corporate Agent (Composite) under valid IRDAI registration number: CA0551 valid till 10-Apr-2024 for solicitation and servicing of Insurance Products. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522