The agreement pact of your home loan is an important deed during the purchase of a home. It is the agreement between the bank and the borrower that defines all the fine details about the loan. After the discussion with the bank representative and the mutual agreement between the two parties, the loan agreement pact is signed and filed.
The loan buyer needs to make sure that they are aware of all the clauses mentioned in the Terms & Conditions of the agreement. There are numerous sub-clauses that have been the bone of contention. Issues between the bank and the individuals have gone to the Courtroom because of various reasons.
Let us take a look at the important clauses that the individual should be aware of:
The Clause of Defaulting
In the laypersons’ term, a defaulter is the one who is unable to make the promised installment for their home loan as per the agreement. But the agreement clauses may include a host of other conditions where the borrower can be declared as a ‘Defaulter’. If the borrower is found involved in a civil or criminal court case then the bank may declare him/her as a defaulter. Certain banks may also include situations like Divorce or Separation with the partner as being the defaulter of the bank.
Clause of ‘Amendment of the Agreement’
At the time of the loan agreement, a certain clause seeks approval of the borrower. The amendment to the agreement, once approved by the borrower, allows the bank to modify the clause – including the interest rate, and also the payment of fine for early repayment of the loan. It is advisable to be aware of the same before signing on the dotted lines.
Interest Fluctuation Clause
Most borrowers would know that the bank offers loans that are either on ‘floating interest rate’ or a ‘fixed interest rate’. The floating interest rate home loan is typically based on the prevailing market conditions. This interest rate is subjected to amendment without the borrower’s approval. The borrower should be aware of the fine details of this clause so as to avoid any future disputes.
The Reset Clause
Widely known as ‘Force Majeure’ clause, this reset clause is designed to convert your fixed interest loan to a floating one. This situation can arise if there is a natural or unavoidable catastrophe that interrupts the natural flow of events. A situation of political unrest (war, communal violence, dissolution of the government) or a natural disaster (earthquake, floods and similar events) may give the bank a reason to execute the Reset clause.
To learn more about the lesser known home loan clauses one can speak to our real estate experts. Our counselor also offers valuable insight about the prevailing property trends in Mohali and Tricity region.