Home Loan Agreement

Home loan agreement is a document that contains all the terms and conditions for your home loan. The terms and conditions are set by the lender and by signing the loan agreement, you agree to the lender that you believe in written terms & conditions and will obey it throughout the tenure period.

The clause included in the home loan agreement includes ‘defaults’, payments and it clearly outlines your debt obligation.

Most often people consider the signing of this document as a formality to get approved for a home loan. However, it is much more than a formality and signing it without understanding properly and lead to problems in the future. Once you have signed the home loan agreement, you are bound to follow the terms and conditions and to meet all the financial implications mentioned in it. So, don’t just sign your home loan agreement just as a formality, read the entire agreement before signing it.

Important Clauses of Home Loan Agreement

  • The borrower has to send his/her statement of Income every year to the bank from where they have availed their home loan.
  • In case the borrowers retire or resign from the employment or in case the Borrower retire under voluntary retirement, in any of these cases whatever money borrower receives from the employer as the settlement or as a benefit, the borrower has to 1st settle the outstanding home loan with that money. After the settlement, the left amount can be used by the borrower for personal use. If that particular amount is not sufficient to close the home loan, the decision is of lender that how much time they will provide to repay it.
  • In case the borrower changes his employment or employer then in that case he/she needs to inform lender regarding the change.
  • This most of the lender it is mandatory to ensure the property against all risks such as earthquakes, fire, flood, Explosion, etc during the Loan period. It is the insurance of Structure or you can say property insurance.
  • Taking loan insurance is also suggested by many lenders and can be mentioned in the loan agreement. So, it is very important to be aware of these facts and then sign.
  • The property for which you have availed the home loan cannot be put for rent before informing your lender during the tenure period of your home loan.
  • You lender has free access to the property for inspection or supervision without asking permission from you during the loan period.
  • There should be clear rules defining the penalties and how much they are going to charge you against the default.
  • Checking for the prepayment and part payment clause is also very important. Different lenders have different rules where some lender allows while some doesn’t. If it’s allowed, it is important to be clear with the charges that how much it is going to cost you.
  • Check for the type of interest rate as most of the lenders offer both fixed and floating interest rate. If you have opted for a floating interest rate you EMI may increase or decrease from time to time. So, it is an important point to consider in your loan agreement.
  • The borrower doesn’t have the authority to sell or Lease the Property during the tenure period of the loan. If the borrower is really in need to do so, he/she should have to take the approval of the lender.
  • If u make any additions in the property for which you have taken the home loan, then u need to inform your lender before doing that.
  • The borrower cannot leave India without repaying the loan. For travel it’s fine but not for employment or business.
  • Be sure for the tenure period regarding your Home Loan. A home loan comes for long tenure and even a slight misunderstanding between you and your lender can impact your financial planning. So, don’t forget to check for this on your loan agreement.

Before you agree:

Home Loan Agreement plays a major role as it contains all the clause of your home loan, which you are bound to satisfy once you sign it. So, be wise and read the entire agreement carefully, in case of any doubt don’t hesitate to clear it with your lender.