Home Loan Agreement - Key Facts You Should Not Ignore
Dealing home loan documents as formality? Or is it first time to experience this? If yes, then it's time to get acquainted with useful know how. Such documents include various clauses and legal sections that are so inexorably written that even a careful reading doesn't help you understand the fine print of them.
The article will help you how to deal with them.
The loan document is not less than a booklet containing 50-70 pages of legal clauses and statements defined so long-windedly that they need close attention to get the essence. Despite having international legislation which articulates that expression of rights of both borrowers and lenders should be clearly mentioned in the entire loan transactions, the status quo of loan agreement in India is different and somewhat outlandish.
A hike in home loan Interest rate prompts many buyers go for fixed rate option. Does it sound that you don't have to bother for next hike in interest rate in future? This is a misconception as some banks in India have articulated in their clause that fixed rates fall into the category of are unpredictable and so bound to change under particular circumstances.
For example, State Bank of India has mentioned in its clause that fixed interest rate can be revised after two years. Corporation Bank and Canara Bank have also said that the fixed interest rate stand variable after five years. Hence, read through home loan agreement carefully to understand the reset clause of bank and query if need be.
Borrowers should be careful about Force Majeure clause in the loan agreement. According to the clause, the bank is authorized to alter the rate of interest under exceptional circumstances like change in internal policies of the bank or unexpected change in financial market during the period of the agreement. However, it is ambiguous what exceptional circumstance prompts bank to change interest rate.
The loan agreement also mentions about default. The definition of default varies as per the situational condition of borrower. The defaults are those borrowers who have not paid EMI during loan tenure OR the borrower has expired or he is undergoing criminal proceeding. Read your loan agreement carefully to understand about default. There are some banks which behave very rudely with default borrower (sometimes they send goons to borrower's home to recover outstanding EMIs).
You should also understand about Security Cover mentioned in the loan agreement. It says that the bank is entitled to demand extra security in case there is hike in property. Even if you pay your EMIs regularly to your bank, if you don't comply with its Security Cover clause, you will be framed as default and the bank can take necessary action against you.
Hope, the entire paragraphs of the article will broaden your horizon about terms involved in loan agreement.
The article will help you how to deal with them.
The loan document is not less than a booklet containing 50-70 pages of legal clauses and statements defined so long-windedly that they need close attention to get the essence. Despite having international legislation which articulates that expression of rights of both borrowers and lenders should be clearly mentioned in the entire loan transactions, the status quo of loan agreement in India is different and somewhat outlandish.
A hike in home loan Interest rate prompts many buyers go for fixed rate option. Does it sound that you don't have to bother for next hike in interest rate in future? This is a misconception as some banks in India have articulated in their clause that fixed rates fall into the category of are unpredictable and so bound to change under particular circumstances.
For example, State Bank of India has mentioned in its clause that fixed interest rate can be revised after two years. Corporation Bank and Canara Bank have also said that the fixed interest rate stand variable after five years. Hence, read through home loan agreement carefully to understand the reset clause of bank and query if need be.
Borrowers should be careful about Force Majeure clause in the loan agreement. According to the clause, the bank is authorized to alter the rate of interest under exceptional circumstances like change in internal policies of the bank or unexpected change in financial market during the period of the agreement. However, it is ambiguous what exceptional circumstance prompts bank to change interest rate.
The loan agreement also mentions about default. The definition of default varies as per the situational condition of borrower. The defaults are those borrowers who have not paid EMI during loan tenure OR the borrower has expired or he is undergoing criminal proceeding. Read your loan agreement carefully to understand about default. There are some banks which behave very rudely with default borrower (sometimes they send goons to borrower's home to recover outstanding EMIs).
You should also understand about Security Cover mentioned in the loan agreement. It says that the bank is entitled to demand extra security in case there is hike in property. Even if you pay your EMIs regularly to your bank, if you don't comply with its Security Cover clause, you will be framed as default and the bank can take necessary action against you.
Hope, the entire paragraphs of the article will broaden your horizon about terms involved in loan agreement.
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