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Aug 03, 2013, 11.21 AM IST

Know some interesting facts in your home loan agreement

Nikolai Kirtikar of apnapaisa.com explains about the interesting facts that should be looked into while going for a home loan. She focuses on taking the help of a professional if need be.

Nikolai Kirtikar, Product Manager ,apnapaisa.com

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Nikolai Kirtikar Apnapaisa.com It is such an exciting feeling to know that the lending institute has agreed to extend loan facility to us to fulfill our most desired dream Our Own Home. Often in that excitement, we forget to read the terms and conditions and blindly sign on those dotted lines without ever trying to understand its implications in the long run which often results in disappointment. Also read: Find out: The need to undergo a loan fitness test In fact, nowadays most of the lenders have uploaded a format of their Home Loan Agreement on their website which can be accessed by any prospective borrower. So before signing the agreement you can always access a copy of the agreement beforehand and study it carefully. If you find it difficult to understand the terminology used, you can always take a professional help or seek clarification from the concerned lender. You should remember that this agreement is legal and once you sign on that dotted line, it becomes binding on you to abide by those terms and conditions. General perception amongst the borrowers is that as long as they dont default in their repayment they need not worry, which is true to a certain extent as the lenders are normally lenient where certain clauses are concerned. So lets look at those certain clauses that generally create inconvenience or hardship if we dont understand its implications: Reset Clause on Fixed rate of Interest

Often the borrowers believe that the interest rate under Fixed rate is fixed for the entire tenure of loan. So when they receive a communication stating that their interest rate has been revised upward they get a shock of their life. And of-course when reverse happens in rarest of rare case, it also puts a smile back on their face. There are only 2-3 lenders, which actually provides home loan with fixed interest rate for entire tenure. Most of the lenders have a reset clause of 2-5 years. Force Majeure Clause / Money Market Condition In the event of extra-ordinary or unforeseen events or changes in money market conditions, the bank has right to unfix and raise the fixed interest rate. Events of Default For a layman Default in loans means non-payment of Emis on time. However, your lender may have a different meaning for the term Default The home loan agreement of few banks defines default as a case when the: Borrower expires, Borrower is divorced (in case of more than a single borrower), Borrower is involved in any civil litigation or criminal offence, Cross default i.e. the borrower defaults on any other loan / facility provided to him by the bank / other lenders. Additional security in falling property rates: This clause states that the lender is eligible to demand additional security if the price of the mortgage property falls. Even if you have a good credit history, this clause demands a security cover in addition to your loan amount. And if you fail to provide such a security then you may be declared a defaulter by the lender. Other generic clauses -

 You cannot stand surety for anybody or guarantee the repayment of any loan without the written permission of the bank. If you change the job, the lender has to be informed within 7 days of change. You cannot leave India for employment or business or stay long-term outside India without fully repaying the loan. You cannot stay out of India for any purpose for more than 60 days. You cannot sell, exchange, partition, mortgage, charge, encumber, lease, or dispose the property till you get 'discharge' from the bank in writing. You cannot hold the bank responsible for any delay in construction, giving possession of, completion of property by developer, promoter or society even if the bank has approved or sanctioned any facilities to such a person or entity. Lender has all rights and at its discretion to change the EMI and Loan Tenure And yes, if you are looking for a clause regarding the communication about changes in interest rate..dont because as per the NHB and Banking Codes and Standards Board of India (BCSBI) guidelines, Banks and Housing Finance Companies can keep borrowers informed about changes in interest rates, charges, terms and conditions through any one of the following: Putting up notices in their branches Through telephones or helplines On the company's website Through designated staff / help desk So dont be surprised if you fail to receive any communication in this regard Always remember that you have every right to get a copy of the loan agreement that you sign. So be sure to demand for a copy of the agreement for your records.