What to ask before you sign

Twelve questions to put to your bank before the home loan agreement is signed. Tick them off as you go, and take this into the branch with you.

In one line

Almost everything on a home loan is negotiable before you sign and almost nothing after. The rate spread, the processing fee, the prepayment terms and the switch-to-OD option are all decided at sanction - which is the one moment you have leverage.

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The 12 questions

Take this into the branch with you

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Fees & Charges
Often negotiable - always ask for a full itemized list before signing
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Is the processing fee a flat amount or a percentage? Can it be waived?
For higher loan amounts (typically ₹2Cr+), ask for a full waiver. Banks often agree for large ticket sizes. Processing fee is typically upto 0.5% of sanctioned amount.
What are the technical and legal charges - legal scrutiny, valuation, security creation?
These are negotiable. Get quotes from multiple banks and use them as leverage. Ask for a Key Facts Statement listing all charges.
Is loan insurance mandatory or optional? How is the premium paid?
Banks cannot make it a condition of sanction. If you have adequate term insurance, home loan insurance is not required. Watch out for one-time premiums added to the loan amount - they increase your interest burden significantly.
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Always get quotes from 2-3 banks before negotiating. A competing offer is your strongest bargaining chip on fees.

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Interest Rate & Benchmark
The single biggest factor in your total repayment
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Is the interest rate fixed or floating?
Fixed gives certainty but is typically higher. Most borrowers go floating - but know what you're signing up for.
What is the benchmark - MCLR or Repo Rate (EBLR)?
MCLR resets annually so your rate stays fixed for a full year after each reset. Repo-linked (EBLR) changes immediately with RBI rate decisions.
FinWiseOwl Take

In the current environment where rates are at a low point, MCLR is the better choice. Your rate is locked for a full year after reset - meaning even if RBI hikes rates, your EMI stays the same for the rest of that year. Repo-linked loans feel the hike immediately. MCLR gives you a meaningful buffer in a rising rate cycle.

What is the reset frequency for my loan - and on what date does it apply?
Confirm this with your bank regardless of the benchmark. Reset periods vary and knowing your exact reset date helps you plan prepayments and anticipate EMI changes.
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Prepayment Terms
RBI rules are on your side here - know them
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Are there any prepayment or foreclosure charges?
RBI mandates zero prepayment charges on floating rate home loans for individual borrowers. If the bank quotes any charges, push back - it is against RBI guidelines.
When I prepay, does it reduce my EMI or my tenure? Can I choose?
Reducing tenure saves significantly more interest overall. Most banks default to reducing EMI - ask if you can opt for tenure reduction instead.
How many part-prepayments are allowed per year, and is there a minimum amount per transaction?
Some banks restrict annual prepayment frequency or require a minimum lump sum. Know this before planning your repayment strategy.
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Loan Structure
Details that affect your cashflow from day one
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Will the loan be disbursed in full or in tranches? Will I pay pre-EMI or full EMI during that period?
For under-construction properties, disbursement is in stages. Pre-EMI means lower payments now but zero principal reduction. Full EMI is better if you can afford it.
Do you offer a home loan overdraft facility, and at what rate vs. the regular home loan?
Home loan OD typically comes at 0.35-0.5% higher than a regular home loan rate. Ask the bank for their exact premium and negotiate it down. Overdraft lets you park surplus and withdraw it anytime, unlike a regular prepayment.
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Not sure if overdraft is right for you? Use our Home Loan vs Overdraft calculator to find your personal break-even in 30 seconds.

Is there a lock-in period before I can do a balance transfer to another bank?
Some banks impose a 6-12 month minimum before you can switch. If rates drop significantly, you want the freedom to move without penalty.