Most first-time buyers find out about these after signing. You shouldn't have to.
A home loan is the largest financial commitment most Indians will make in their lifetime. The process is complex enough that banks and builders rely on your information overload to slip through terms that aren't in your favour. Most first-time borrowers only understand what they signed two or three years in, when a rate revision notice arrives or a prepayment situation comes up.
These 12 checks, done before you sign, can prevent the most expensive surprises.
All new home loans originated after October 2019 should be RLLR (Repo Linked Lending Rate) linked. If any lender is offering you an MCLR-linked loan today, ask why and what the implication is. RLLR transmits RBI rate changes faster, which in a cutting cycle is beneficial to you.
Your total rate is repo rate + bank spread. The spread is fixed for the life of your loan. Two banks with the same advertised rate today might have different spreads. The one with the lower spread will cost you less in total if RBI keeps rates steady or cuts further. Ask specifically: "What is the spread component of my rate?"
Home loan protection insurance is almost always optional despite what some bank relationship managers imply. If a bank says the insurance is mandatory, ask for that condition in writing. RBI guidelines prohibit tying the loan approval to insurance purchase. You can buy a separate term insurance policy that covers your loan amount at a potentially lower cost.
RBI has banned prepayment charges on floating rate home loans. If the bank's loan agreement mentions a prepayment charge on your floating rate loan, that clause is contrary to RBI regulations and you can flag it. For fixed rate home loans, prepayment charges are still permitted. Know which one you're getting and what the penalty is.
RLLR-linked loans reset quarterly. But some banks structure things differently. Confirm that your rate will reset within 3 months of any RBI rate change. A longer reset cycle means you wait longer to benefit from rate cuts.
Get the number inclusive of GST. Banks often quote pre-GST and you end up paying 18% more than you expected. On a ₹50 lakh loan with a 0.5% processing fee, the fee is ₹25,000 and the GST on that is ₹4,500. Know the full number going in.
Ask specifically: what is the late payment charge, what is the penal interest rate, and after how many days of non-payment does the bank initiate recovery proceedings? Understanding the default process upfront is especially relevant if your income is variable or you're stretching your EMI-to-income ratio.
Some lenders, particularly smaller HFCs (Housing Finance Companies), have lock-in periods of 1 to 3 years during which you cannot switch to another lender (balance transfer) or prepay beyond a certain amount without penalties. If a cheaper rate is available from another lender later, a lock-in traps you.
The bank does its own legal verification of the property before approving. But you should independently verify the title chain, ensure the property is free of encumbrances, and check that all approvals (building plan, occupation certificate, RERA registration) are in order. The bank's legal check protects the bank's collateral. Your independent check protects your investment.
Under the old tax regime: principal repayment up to ₹1.5 lakhs per year is deductible under Section 80C, and interest up to ₹2 lakhs per year is deductible under Section 24(b). Under the new tax regime: neither benefit applies. If you're on the new regime, factor in that the effective home loan cost is higher than for someone on the old regime claiming these deductions.
Banks will approve home loans where the EMI is up to 40 to 50% of your gross income. But "approved by the bank" and "comfortable for you" are different things. Most financial planners suggest keeping the home loan EMI under 35 to 40% of take-home (net) income. Above that, unexpected expenses, income disruptions, or rate hikes can strain your finances significantly.
Builders have tie-ups with specific banks and often push buyers toward those banks, sometimes implying special deals. Those deals are occasionally genuine but they're often not better than what you'd get by shopping independently. The relationship between builders and banks involves incentives that don't necessarily benefit you. Get quotes independently from at least SBI, your primary bank, and one other major lender before deciding.
The one question most worth asking: "What is my all-in total loan cost including processing fee with GST, insurance if applicable, and stamp duty?" Getting this single number for each lender you're comparing gives you a true apples-to-apples comparison, rather than comparing headline rates that don't include the full cost picture.
Before signing anything, know what's fair in the market right now
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