The moment you decide to buy a home, you can put in your application for a Home Loan. You can apply for a Home Loan even before you have selected the property. The loan amount would be sanctioned or approved, based on your repayment capability.
There are a variety of home loans made available by the different finance companies.
The maximum home loan amount one can borrow depends on many factors, which include the purpose of the loan, whether for purchase of property, or improvement or purchase of land for development. Also the residential status of the applicant, whether resident in India or non-resident will also have a bearing on the maximum quantum of loan that one can borrow. Typically, a Resident Indian can borrow up to 85% of the cost of the property, including cost of land, subject to a maximum of Rs 5,000,000.
The bank checks the customer's repayment capacity based on income, age, qualifications, number of dependants, spouse's income, assets, liabilities, stability and continuity of occupation, and savings history.
The primary documents that have to submitted are:
Bank offers loans up to 20 years, provided the term does not extend beyond 65 years of age or the retirement age, whichever is earlier.
Processing fees and administrative fees, both payable upfront; are the charges payable to the Housing finance company for sanctioning of Housing loans. The processing fee (fees at the time of application) could range between 0.8% to of the loan amount applied for, and is generally levied to cover the costs incidental to the application. Once the loan is sanctioned, an administrative fee of 1% - 2% of the loan amount sanctioned will have to be paid.
After you have given us all the relevant documents, you can get a sanction for the loan within 5 working days, under normal circumstances.
You can choose among the following options to give repayment instructions:
Yes, you can repay the loan ahead of schedule by making lump sum payments or choose an accelerated repayment scheme.
You have the option of paying either pre EMI (interest on the amount of loan disbursed thus far) or full EMI during this period.
A Fixed interest rate for Home loans is one where the rate charged by the HFC on the loan amount is constant over the tenure of the loan. A fixed interest rate protects the borrower from a rise in home loan rates. While on the flip side, he may not benefit if the market rates were to fall. Therefore, it is advisable to go in for a fixed rate if you feel that the rate of interests in the market have touched rock bottom and the rates can only move upwards.
A Floating interest rate for home loans is a loan where the interest rate which is payable is linked to the market rate e.g. the bank lending rate. The interest rate payable by you will also rise and fall as per bank lending rates which may fluctuate.
Home loans interest rate in India is usually calculated either on monthly reducing or yearly reducing balance. In the Monthly reducing system, the principal on which you pay interest reduces every month as you pay your EMI. While in the Annual Reducing system the principal is reduced at the end of the year, thus continuing to pay interest on a certain portion of the principal which you have actually paid back to the lender thus making EMI for the monthly reducing system effectively lesser than the second system of calculating interest.
You have the option of changing your interest type from Fixed to Variable or vice-versa provided you pay certain percentage at the time of exercising the option.
Collateral securities are the additional securities taken by the HFCs which may be in the form of guarantee from one or two persons, assignment of life insurance policies, deposit of shares and units or other securities. These additional securities are taken so that if a loan is not paid back, recourse may be taken to such securities instead of depending upon the mortgage of the property which is the last resort.
The security for the loan is a first mortgage of the property to be financed, normally by way of deposit of title deeds and/or such other collateral security as may be necessary. Interim security may be additionally required, if the property is under construction. Collateral or interim security could be assignment to any institution of life insurance policies, the surrender value of which is at least equal to the loan amount, guarantees from sound and solvent guarantors, pledge of shares and such other investments that are acceptable to the institution. Please do ensure that the title to the property is clear, marketable and free from encumbrance. To elaborate, there should not be any existing mortgage, loan or litigation, which is likely to affect the title to the property adversely.
Yes. Once you have completed six months of repayment on your home loan, we offer you the option of applying for a top up loan, over and above your existing home loan.
Pre-EMI is the amount of loan paid in simple interest as agreed upon with the HFC for a property that's yet under construction. The HFC makes the disbursement in parts as per the stage of construction of your property. Once the property is ready for possession and the possession letter is produced to the HFC, the final disbursement is made. You start paying your EMI from the month following which the full disbursement is made.
An EMI refers to the fixed sum of money that you will be paying to the housing finance company every month against a loan amount borrowed for a fixed period of time. An EMI has two components, the principal component and the interest component. . The amount of the EMI depends on the quantum of loan, interest rate applicable and the term of the loan. The loan carrying the lower EMI for the same tenure is the cheaper option.
To help customers save pre-EMI interest, a special facility of Tranche Based EMI was introduced. For under-construction properties, customers can choose the instalments they wish to pay till the time the property is ready for possession. Anything paid over and above the interest by the customer goes towards principal repayment. The customer benefits by starting EMI and hence repays the loan faster.
Yes. 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. can get you a tax saving up to about Rs. 50,490 p.a. Moreover, you can get added tax benefits under Section 80 C on repayment of principal amount up to Rs. 1,00,000 p.a. that can further reduce your tax liability by about Rs. 33,660 p.a.
In many states in India, the Agreement for Sale between the builder and purchaser is required by law to be registered. You are advised, in your own interest to lodge the Agreement for registration within four months of the date of the Agreement at the office of the Sub-Registrar appointed by the State Government, under the Indian Registration Act, 1908.
In terms of Chapter XX C of the Income Tax Act, 1961, the Central Government has the first option to purchase certain immovable properties exceeding certain value and as such transactions covered by this Chapter can be proceeded with only after complying with the requirements prescribed therein.
The repayment capacity of the applicant(s) based on Resident status is reassessed and a revised repayment schedule worked out. The new rate of interest will be as per the currently applicable rate of Resident Indian loans (for that specific loan product). This revised rate of interest would be applicable on the outstanding balance being converted. A letter is given to the customer confirming the change of status.
One should seek clarifications regarding the fees for processing the loan, prepayment charges, spread, i.e., the difference between the PLR and the rate actually charged on the loan, charges for conversion from one loan rate structure to the other and the reset period clause for the floating rate loans. If one wants to borrow home loan on a fixed rate then one must check out whether the fixed rate is applicable for the entire period of the loan or whether it is attached with a money market clause whereby the fixed rate is changed after a certain period of time depending on the money markets or internal policies of the lender. If possible one can also seek a copy of the agreement copy and read it carefully before taking a decision.
You could go in for a Home Conversion Loan with your lender whereby your existing loan could be transferred to the new property with an increase in loan amount subject to your current loan eligibility. This would save you from the hassle of prepaying the first loan, also saving you from prepayment and processing charges to the extent of the loan converted.
An Equated Monthly Installment (EMI) has 2 components: interest and principal. When the interest is calculated on monthly rests, the principal on which the interest is charged goes down every month. This results in significant savings for the customer over the tenure of the loan.
An Equated Monthly Installment (EMI) has 2 components: interest and principal. When the interest is calculated on annual rests, the principal reduces only at the end of the year. Therefore, you continue to pay interest on a portion of the principal that you have already actually paid back to the lending company.
An amortization schedule is a table giving the reduction of your loan amount by monthly installments. The amortization schedule gives the break-up of every EMI towards repayment interest and outstanding principal of your loan.
As per IT rules, only one certificate can be issued for a Home Loan hence one certificate will be issued in the name of both the applicant and co applicant.
You can request for a provisional IT certificate that can be issued any time during the course of the year. The final IT certificate will be issued at the end of a financial year. You can expect to receive your copy in the month of April or May.
You will have to ensure that the property is duly and properly insured for fire and other appropriate hazards, as required by the HFC during the period of the loan and will have to produce evidence each year and/or whenever required by the HFC. The HFC will be the beneficiary of the insurance policy and will be an additional cost that will add to the final cost of purchase of the property.
Yes, NRIs can avail of a housing loan to buy a property in India. However, the terms and conditions for a NRI loan offered by the banks and HFCs are different than Housing finance granted to Residents of India.