Saturday, 25 July 2015

HOME LOAN AGREEMENT


Home Loan Agreement: With the ongoing flurry of activity and festivity prevalent in the home loan segment of India recently, a large number of people, in the euphoria to acquire that dream house, tend to overlook some of the most important clauses in the home loan agreement. However, what they don’t realize is that these clauses have a significant bearing on wide number of areas ranging from interest rates to repayment schedules.

Some of the simple clauses of the home loan agreement regarding to simple matters, such as how often the housing finance company resets interest rates in a year can make a considerable impact on the floating rate home loans.  The norms in the industry practices suggest that interest rates for home loan consumers are reset only when the bank’s prime lending rate is changed.Therefore it is the frequency of these resets that is really important. Some of the finance companies offer home loan agreements wherein the interest rates are reset in each quarter. Alternatively, there are other companies who do the revision only once a year. Sadly not many home loan consumers are aware of the clause related to the fixed rate homeloans, which the financial companies some times insert in their home loan agreement.

This ignorance can cause the customers unintended losses in case of revision of the fixed rate home loan rates. Most of the customers are not aware that this particular fixed rate clause in the home loan agreement permits the financial institutions to change the loan’s repayment schedule and terms and conditions.


The financial institutions in a rising interest rate environment might exercise this option in order to safe guard themselves and in the interest of their own company. This move is usually not in the best interests of the customer or the home loan seeker as the modification of the repayment schedule, terms and conditions might affect the overall repayment of the consumer. The long list of terms and conditions of the home loan agreement, usually contain clauses which might possibly have a number of significant implications for the consumer and therefore it is important that the consumer is aware and makes an informed choice accordingly.

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