Home Loan

Home loan is really critical and important financial decision in our lives. Before you finalise your bank to secure home loan, try to get more information on current interest rates from different banks. First, gather some more information about how much each bank can give you. Find out eligibility for government and private banks. Which interest rate is more flexible and affordable such as fixed rates or floating rates? What is more easy a prepay option or balance transfer? We try to give answers to all such questions, and make this home loan process simple for you. To find the lender for 20 years term go through the fine print and save for years to come. A perfect Home loan is loan which gives you lowest rates throughout the tenure, has part payment options and allows you to balance transfer if you wish to.

A little knowledge about home loan and what is being currently offered in the market will go a long way in getting that best deal on your home loan.

But before you proceed to meet the lender, it is beneficial to have some knowledge about the product, even though you may have an earlier experience of availing the home loan.

Some of the key points are listed below for your consideration before you approach the lender for home loan.

Purpose of Home Loan:

Lenders generally finance for –
1. Buying under-construction / new or resale residential property
2. Construction of house
3. Buying a plot of land for construction of dwelling unit
4. Renovation and Extension of exiting residential property
5. Refinance of existing home loan

Loan Amount:

Normally financial institutes finance maximum up to 80% (90% for loan amount below Rs. 20 lakhs) of the agreement value of the property. As per RBI notification, banks do not fund stamp duty and registration charges anymore. This means that your down payment will have to be at least 10% – 20% of the agreement value of the property plus 100% of other costs such as stamp duty, registration charges, etc
The final loan amount is dependent on host of other factors like income and regular outgoings, existing loans, repayment track record, valuation of the property by the lender, etc.
To increase the eligibility amount, you can add your earning parents / spouse / children and in some cases brothers as co-borrowers to the loan.

Interest Type:

Very few financial institutes offer pure “Fixed” interest rate that remains fixed for the entire duration of loan. Nowadays, some lenders offer “Dual Rate” where the interest rate remains fixed for duration 1 – 10 years and then gets converted to floating rate of interest.
In “Floating” rate, the interest rate fluctuates with market conditions. The rate of interest is tied up with the Base Rate (BR) of the bank or Prime Lending Rate (PLR) of the Housing Finance Companies and gets affected whenever there are changes in the repo rates announced by RBI or any changes in Base Rate / PLR of the lender.

 

Repayment:

Most lenders offers maximum tenure of 30 years but it is also restricted by the borrower’s age at the end of the tenure so as to ensure that the loan repayment ends on or before the retirement age of the borrower which is usually 60 years for salaried and 65 years for self employed borrowers.

Fees and Charges:

Every loan has a costs attached to it like Processing Fees or Administrative fees which are non refundable, Legal fees payable to the lender or to the legal consultants of the lender, Stamp duty on creation of mortgage, etc.
Foreclosure charges are applicable only on fixed rate loans taken from bank, whereas housing finance companies levy prepayment penalty only on fixed rate loan if prepaid from other than own sources.

Documents required in Home Loan

Generally, the documents required to process your loan application are almost similar across all the banks; however they may differ with various banks depending upon specific requirement etc. Following documents are required by financial institutions to process the loan application:

  • Income
  • Age Proof
  • Address Proof
  • Income Proof of the applicant & co-applicant
  • Last 6 months bank A/C statement
  • Passport size photograph of the applicant & co-applicant

In case of Salaried

In case of Self-employed

Employment certificate from the employer,

Copy of audited financial statements for the last 2 years

Copies of pay slips for last few months and TDS certificate

Copy of partnership deed if it is a partnership firm or copy of memorandum of association and articles of association if it is a company

Latest Form 16 issued by employer Bank statements

Profit and loss account for the last few years

Income tax assessment order

 

How is my Home loan Eligibility Calculated

The borrower's eligibility of getting a housing loan depend upon his/her repayment capacity & the banks establish this repayment capacity by considering various factors such income, spouse’s income, age, number of dependants qualifications , assets, liabilities, stability and continuity of occupation and savings history. Eligibility Factors in Housing loan Your Home Loan eligibility is determined by your repayment capacity and the value of the Property

  • Income
  • Qualifications
  • Age
  • Spouse’s income
  • of dependants
  • Stability and continuity of occupation
  • Assets/Liabilities.
  • Savings history.

The most important concern of banks in determining your loan eligibility is that whether or not you are contentedly able to pay off the amount you borrow.

The Second factor is the value of the Property

Banks are okay to fund 75-85% of property value but with the condition that you have income capacity that you can pay its EMI each month.