Buying a home is a special moment in the life of every individual. If you are planning to buy your dream house, availing a home loan can be of great assistance. While taking up a home loan most borrowers only prioritize the basic factors such as low interest rates and easy down payments. They often overlook the importance of the clauses mentioned in the loan agreement. However, a home loan is a major financial decision and you will have to abide by the terms and conditions of your home loan throughout the loan tenure. This is equally important as to Compare Home Loan Rates before taking a loan. Therefore, in order to avoid any inconvenience in the later stages, it becomes extremely important to be aware of its important clauses. Below are some of the important clauses that you must carefully browse through before signing the loan agreement.
Security cover clause
Since a home loan is a secured loan, the property being purchased is usually the collateral. However, if the financial institution considers the collateral to be insufficient, borrowers may be required to provide additional security to cover the outstanding loan amount. The security cover clause ensures that the loan is adequately covered for the entire tenure.
Prepayment refers to making the repayment in excess of the EMI obligations stipulated in the home loan agreement. This prepayment clause stipulates how prepayment can be made and the financial implications of such prepayment.
Clearing other dues
The payments made by the borrowers would first be adjusted against other outstanding dues. This could be late payment penalties, processing fees, etc. Once these dues are fully recovered, the payment would be applied towards principal repayment.
Assignment to third parties
The financial institution may choose to assign a home loan to a third party either in case of default or for their own business convenience. The terms and conditions of the loan would remain undiminished and transferred to the identified third party.
The borrower is obliged to notify the loan-provider of any change in his employment, income levels, or residential status, etc. to the lender. The notification clause stipulates the timeframe and mode of notifying these.
Definition of default
If the borrower fails to meet his repayment obligations, it is considered a default. This clause specifies the situation under which borrowers would be considered to have defaulted and the implications of the same.
The amendment clause specifies how, when and who can make amendments to the home loan agreement. It also specifies the rights and obligations of each party in such circumstances.
Now that you are well aware of all the important clauses, make sure that you go through all of these before signing the loan agreement. In case of any doubt regarding any of the clauses, you must seek the clarifications from the loan provider.
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