A home loan represents a loan taken for the purpose of buying or constructing a home, or to make improvements to an existing residential property. Home loans in India can be availed from banks and registered housing finance companies.
Home loans are secured against the property that you buy, which means that in case you are unable to repay the loan, the lending bank will have the right to take possession of your home.
With our highly personalized real estate advisory services, we at Happykeys assist you in easily availing home loans at attractive interest rates. Our skilled advisors will not only assist you in searching and selecting the best property to suit your requirements, but will also help you avail home loans at low interest rates for your property purchase.
Home loan is a way of finance for purchase of residential property, usually with specified payment periods and interest rates. The borrower gives the lender a lien on the property as collateral for the loan. The mortgagor's lien on the property expires when the mortgage is paid off in full.
There are a variety of home loans available. They are:-
Home Purchase Loan:
This is the common loan for buying a house either a new one or on resale.
Home Improvement Loan:
This loan is given for undertaking repairs, renovations and/or up-gradation to your house.
Home Construction Loan:
This loan is available for the construction of a new home.
Home Extension Loan:
Home extension loans are given for expanding or extending an existing home. For example, addition of an extra room or FSI allotted to the owner of the property
Home conversion loan:
Home conversion loan is available for those who have financed the present home with a Home Loan and wish to purchase and move to another home for which some additional funds are required. Through a Home Conversion Loan, the existing loan is transferred to the new home, including the additional amount required, eliminating the need for pre-payment of the previous loan.
This type of loan is sanctioned for purchase of land for home construction.
The Bridge Loan is designed for people who wish to sell the existing home and purchase another. The bridge loan helps finance the new home, until a buyer is found for the old home
EMI (Equated Monthly Installment) is the amount payable to the lending institution every month, till the loan is paid back in full. It consists of both interest and principal component.
For Home loan lenders in general look at your ability, stability and creditworthiness before they lend. Loan is provided to the below category:
a) An Indian resident or NRI
b) Above 21 years of age at the commencement of the loan
c) Below 65 when the loan matures
d) Either salaried or self -employed
e) Worthy of credit facility as per information on Credit Bureau
The interest on home loans in India is usually calculated on monthly reducing balance. Some banks/ lending institutions also provide Home loans which are on daily reducing basis.
Under this program, the principal, for which you pay interest, reduces at the end of the year. Thus you continue to pay interest on a certain portion of the principal which you have actually paid back to the lender through EMIs paid during the year.
In this system, the principal, for which you pay interest, reduces every month as you pay your EMI and interest is calculated on the principle outstanding thereafter.
In this system, the principal, for which you pay interest, reduces from the day you pay your EMI.
Fixed rate of interest means that the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, if rates of interest drop in the market. Similarly you do not lose if rates of interest increase. Under fixed home loan rates also, banks/HFCs may retain the right to increase the rate of interest know as reset clause after the prescribed interval which will be mentioned in the loan agreement.
This is the rate of interest that fluctuates according to the market lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up. Floating rate is linked to BPLR or the base rate of the lender as the case may be.
Home loans usually attract following extra costs
1. Processing Charge: It's a fee payable to the lender on applying for a loan. It is either a fixed amount or may be a percentage of the loan amount applied.
2. Pre-payment Penalties: You will be charged a Pre-payment penalty when you fore-closure your loan under fixed interest rate before the stipulated period. As per RBI guidelines there is no pre-payment penalty under floating rate of interest.
3. Miscellaneous Costs: Other Miscellaneous costs such as Lenders may charge CERSAI charges, as per Central Registry of Securitization Asset Reconstruction and Security Interest of India for creation of charges, conversion charges for switching of interest rates, document retrieval and handling charges etc.
4. Stamp duty for loan: Registration of mortgage deed by deposit of titled deed or registered mortgage.
The loan to value on Home loan will range from 75% -85% a maximum of 85% of the cost of the house basis the loan amount. The balance is called 'margin money', has to be provided by the loan applicant upfront. The amount, for which the applicant is eligible, is determined by the age, income, number of dependents, monthly outgoing and repayment capacity and credit score. This varies from case to case.
Property is the prime security for Home loan and is mortgaged to the lending institution till the entire loan is repaid. Lender can ask for additional security in case to case basis which could be LIC policy, FD, NSC certificate if there are not comfortable with primary security provided.
Lenders need to complete the legal and technical clearance before the disbursement. On an average, loans are disbursed within 5-15 days after satisfactory and complete documentation and completion of all relevant procedures, including margin money has been paid upfront to the seller of the property.
- Resident Indians are eligible for certain tax benefits on principal and interest components of a loan under the Income Tax Act, 1961. Interest repayment of Rs. 1,50,000 p.a.
- You can get added tax benefits under Sec 80 C on repayment of principal amount upto Rs. 1,00,000 p.a.
- Budget 2013 also offers an additional Rs 1 lakh interest tax deduction on a home loan under Rs 25 lakh for first time first time home buyers under section 24 of Income Tax Act, 1961
1. Completed loan application
2. 1 passport size photographs (including those affixed in loan application)
3. Proof of identification: Electoral ID Card / Passport / Driving License / PAN card.
4. Proof of residence: Electoral ID Card / Passport / Electricity Bill / Telephone Bill.
5. Proof business address, in case of non- salaried borrowers
6. Statement of bank account for the last six months