9 Things to Do Once Your Home Loan is Sanctioned
1. Go through the sanction letter thoroughly
Banks require you to read the sanction letter and return one copy to them after confirming that you have accepted the terms and conditions. Therefore, you should read the sanction letter thoroughly. In case you find any onerous clauses, you can take up the matter with the bank for resolution. Once satisfied with the terms and conditions, you can acknowledge the copy of the sanction letter and return it to the bank.
2. Documentation Process
Banks have a documentation process to complete before the release of the funds. There are different documents for different loans. Complete these formalities and insist on having a copy of these documents for your record. In case of a Home Loan Balance Transfer, the bank makes the payment directly to the current bank. It is your responsibility to close the account, collect the original title deeds, cancel the equitable mortgage, hand over the documents to the bank and create a new equitable mortgage in favour of the present lender. It completes the Home Loan approval process.
3. Be prompt in your repayments
Ensure that you don’t miss out on a single repayment. Pay your EMIs (Equated Monthly Instalments) on time as it helps in boosting your credit score. The credit bureaus collect the information from the banks and update the reports every month. Any delay in the repayment reflects on your credit report and damages your credit score.
4. Take out loan insurance
Home Loans are big-ticket loans. Should any untoward incident happen to you, your family should not feel the burden of the Home Loan. Therefore, it is advisable to take a home loan insurance policy. Such policies require you to pay a one-time premium. Banks today have Home Loan offers that include financing of the home loan insurance premium. It is of mutual benefit. Banks add the EMI for the premium to your Home Loan EMI so you do not feel the pinch of paying a lump sum amount as an insurance premium.
5. Prepay the Home Loan if you have sufficient funds
Whenever you have additional funds at your disposal like maturing of investments, receipt of bonuses, increase in salary, and so on, make sure to channelize the funds towards your home loan. It reduces your overall liability to a great extent. Nowadays, banks do not charge any prepayment penalties. However, it is better to check up with the bank. Now, you understand the importance of going through the terms and conditions thoroughly.
6. Have an emergency fund in place
You never know when you are faced with an emergency situation that requires immediate funds. It can be the loss of a job or an illness that requires medical attention. It makes sense to have an emergency fund having an amount equal to six months monthly expenses. Remember, this is an emergency fund. Never dip into these funds to repay your Home Loan installment unless it is an emergency.
7. Avoid additional loan
Banks approve home loan top-up to eligible borrowers. They are available to you in an emergency. In case you do not need the top-up, do not go for it. The loan is attractive, but it increases your liability. Multiple loan applications within a short period can bring down your credit score considerably.
8. Keep your ‘Home Loan Balance Transfer’ options open
Today, you have attractive Home Loan offers coming from everywhere. Keep your options for a Home Loan Balance Transfer open. You might find another lender providing you a better interest rate and other facilities. However, you should have an excellent repayment history to take advantage of the ‘Home Loan Balance Transfer’ options. Know the costs involves in a balance transfer. Estimate your liabilities and go for it if the offer seems attractive enough.
9. Have a health and personal accident insurance in place
Home Loan providers have tie-up arrangements with prominent insurance companies to offer health and personal accident insurance to their home loan borrowers. Such policies come with easy terms and conditions when you combine them with your home loan. The home loan provider includes the premium for these policies in the loan amount. Thus, you should not find it difficult to pay the initial premium.
Your principal duty on availing any loan is to ensure prompt repayment. It improves your credit rating a great deal.
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