A home is not just a place that we live, it is a place that is filled with feelings and emotions. We all get connected to our homes and having our own house is a dream that everyone would like to cherish. When we plan on to take a house of our own, it is not possible for everyone to put all their savings on one investment, so few of them will plan on to take loans. Home loans are the loans that will help to fulfil the dream of owning the house. Once we get the loan, we generally don’t consider looking at other things that are somewhere placed in the loan agreement in terms and conditions section.
Terms and Conditions of the Home Loan:
1. Security cover clause: The basic reason a surety is asked to be pledged to the lender is because it acts as a security for the loan provided. Your home or property that is being purchased will play the role of security for the loan and this security should adequately cover the entire tenure period of the loan.
If in case, the property due to its fall in the price or damage in the asset takes place, then the lender might ask for additional security just to safeguard the loan amount. The lender will never wish to take the risk of losing the amount, he will make sure that the security offered by you is in good condition and only then the loan will be given based on the worth of the asset.
2. Prepayment clause: This clause in the home loan agreement tells you about the financial implications that cause when a prepayment is made to the lender.
Prepayment is the amount that is paid excessively to the lender as EMI. An EMI is basically paid off every month, but when you happened to have extra funds, they can be used for adjusting the outstanding loan amount by making a prepayment.
3. Notification clause: This clause is mainly about the changes that happen in your income level, employment, business, change in address or residential status, etc. You are required to notify the lender whenever there is a change in any of the mentioned status.
Notification clause will stipulate about how to notify these changes to the lender, within what timeframe it must be informed, to whom it has to be notified.
4. Adjusting other balances: Availing of the loan will include a lot more than just the interest rate. You need to make other payments that are transaction fees, late payment fees, extra charges, etc. The lender will first adjust these extra payments from the loan amount and then the remaining amount will be applied towards the principal amount and EMI payments.
5. Defaulting the payment clause: Defaulting means when you have missed out on your payments that are supposed to be paid to the lender. So, when we talk about this clause, it will explain to you about the implications that you will have to face when you will not meet the repayment obligation.
This could be anything from the lender taking a legal action by seizing the property or asset and other implications to it.
6. Assigning the loan to third party: The lender at any point of time can assign your loan to other third-party members. The reason could be for defaulting the payment or for their own convenience. The whole loan agreement will be transferred to the third party by the lender without taking your approval.
So, you need to make the payment on time and make sure that your loan shouldn’t go in the hands of the third party member because once the agreement goes to them, your property that is pledged with the lender will be seized or taken a legal action against it.
