Consultants Review Team

Applying for a home loan can feel overwhelming, especially if it’s your first time. The process often involves unfamiliar terms that might leave you scratching your head. Don’t worry—we’ve got your back! This blog will help you understand the most common terms used in the home loan process, making your journey smoother and stress-free.

1. Principal Amount

The principal amount is the money you borrow from a lender. For instance, if you’re buying a house worth ₹30 lakh and take a loan of ₹25 lakh, this ₹25 lakh is your principal amount. It’s important to know this term because all calculations for interest and EMIs are based on it.

2. Interest Rate

This is the cost of borrowing money, expressed as a percentage. There are two main types of interest rates in the home loan process:

• Fixed Interest Rate: The rate remains constant throughout the loan tenure.
• Floating Interest Rate: The rate varies based on market conditions.

Choosing the right type depends on your financial goals.

3. EMI (Equated Monthly Installment)

EMI is the fixed monthly payment you make towards repaying your home loan. It includes both the principal and the interest. Understanding your EMI is crucial because it helps you plan your monthly budget better. Use an EMI calculator during the home loan process to know how much you’ll need to pay each month.

4. Loan Tenure

This refers to the duration for which you borrow the loan. Loan tenures for home loans typically range from 10 to 30 years. A longer tenure reduces your EMI but increases the total interest you pay.

5. Down Payment

Lenders usually finance 75% to 90% of the property value. The remaining amount you must pay upfront is called the down payment. Saving for the down payment is one of the first steps in the home loan process.

6. Processing Fee

This is a non-refundable fee charged by the lender to process your loan application. It’s usually a small percentage of the loan amount.

7. Prepayment

Prepayment is paying off your loan amount partially or fully before the end of the tenure. While it reduces your interest burden, some lenders may charge a prepayment penalty.

8. LTV Ratio (Loan-to-Value Ratio)

The LTV ratio is the percentage of the property’s value that the lender finances. For example, if your house is worth ₹50 lakh and you get a loan of ₹40 lakh, your LTV ratio is 80%.

Conclusion

Understanding these terms can make the home loan process less intimidating and more manageable. At Piramal Capital and Housing Finance Limited, we aim to simplify every step for our customers. Ready to take the next step? Apply for your home loan today and bring your dream home closer!

By learning this lingo, you’re already ahead in your journey toward homeownership!