One of the kids in the office said ‘I am planning to buy a house….what should I look for?’

I said house – I have no clue, but have friends in Hdfc and I can give you their numbers…and they may be able to help on the builder feed back…

She said….No, no, I have chosen the builder and the house too…just tell me what to look for in a loan (mortgage as the yankee would say)…I thought for some time and said:

Interest rate.

She said what in interest rate: So I said

Flat rate or Reducing balance.

Rests: Monthly, Quarterly or Annual.

Floating rate or a Fixed Rate?

If floating rate, then linked to what rate.

Is that rate independent of the lender?

then how often will the reset change?

will she have to check the reset…

and the reset will increase her term or her EMI….

she said ‘I thought the TOUGH job of buying the house is over… it is the ‘EASY’ part.

Sounds complicated, does it not? L O L.

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  1. Hi Subra Sir, this article is from a point of view of a new buyer. For a existing buyer does it makes sense to withdraw my Mutual funds accumulated through SIP and close the Home loan (I do not have any prepayment charges)? My SIP are a bit in loss as market are near low of 1-2 years. This will close my outgo of Loan EMI @ 11% Interest payment (I am expecting more increase in Interest rates as Inflation doesn’t seems to be coming down). The extra cash in hand, by not paying EMI, can be used to start a new SIP with more amount than what I am doing right now. (I read your article Rent vs Buy after I bought the Home 🙂 )

  2. Hello Sir,

    Very essential set of questions indeed. I am sufferer of not asking the questions…

    If floating rate, then linked to what rate?
    Is that rate independent of the lender?

    Mine was started from 7.75 and rate started climbing, still being charged 13.5% (last two months so not transfering ….;-)
    But, the floating rage was linked to bank’s own RPLR (or… XYZ something) which they change on their own convinience… It also happened that while I was being charged @11.5% bank was celebrating customer week, where new customer’s being offered loan at 8.5%)…

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