HOME LOAN

A home loan is a loan taken for buying or constructing a home or to make improvements to a residential property. You can get a loan from from banks and registered housing finance companies. Your home loan is secured against the property that you buy. This means that in case you are unable to repay the loan, the lending bank will have the right to take possession of your home.

TYPES OF HOME LOAN

A common type of loan taken for purchasing a home from the bank or companies.

HOME PURCHASE LOAN

Home extension loans are for expanding or extending an existing home. For example, addition of an extra room, etc.

HOME EXTENSION LOAN

This loan helps to pay off the debt you may have incurred from private sources in order to purchase your present home.

REFINANCE LOAN

A loan given for implementing repair works and renovations at home.

HOME IMPROVEMENT LOAN

This type of loan is sanctioned for purchase of a land, for both investment purposes and home construction.

LAND PURCHASE LOAN

This loan is tailored to suit the requirements of NRIs who wish to build or buy a home in our country (India).

LOANS FOR NRIs

A loan available for the construction of a new home, taken by the borrower.

HOME CONSTRUCTION LOAN

This loans help you pay off an existing home loan with a higher interest rate, and avail of a loan with a lower rate of interest.

BALANCE TRANSFER LOAN

EMI (EQUATED MONTHLY INSTALMENT)

EMI (Equated Monthly Instalment) is the amount payable to the lending institution every month, till the loan is paid back in full. It consists of a portion of the interest as well as the principal.

ELIGIBILITY CONDITIONS

To qualify for a home loan, most of the lending institutions in India require you to be :-

  • An Indian resident or NRI

  • Above 24 years of age at the commencement of the loan

  • Below 60 or retirement age when the loan matures

  • Either self employed or salaried

INTEREST CALCULATIONS

Interest rates are different from institution to institution and generally range from about 8.75% to around 12 %. The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance. In some cases, daily reducing basis is also adopted.

ANNUAL REDUCING

In this system, 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. This means the EMI for the monthly reducing system is effectively less than the annual reducing system.

MONTHLY REDUCING

In this system, the principal, for which you pay interest, reduces every month as you pay your EMI.

DAILY REDUCING

In this system, the principal, for which you pay interest, reduces from the day you pay your EMI. EMI in the daily reducing system is less than the monthly reducing system.

TYPE OF INTERESTS

FIXED RATE

Some institutions have a fixed rate of interest, which means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, even if rates of interest drop in the market.

FLOATING RATE

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.

OTHER COSTS THAN ACCOMPANY A HOME LOAN

01

PROCESSING CHARGE

A fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount required cannot be less than the processing fee.

02

PRE-PAYMENT PENALTIES

When a loan is paid back before the end of the agreed duration, a penalty is charged by some banks/companies, which is usually 2% of the amount being paid.

03

MISCELLANEOUS COSTS

Some lenders may levy documentation or consultant charges which costs extra on processing a home loan.

FREQUENTLY ASKED QUESTIONS

HOME LOAN DOCUMENTS

Generally, the documents required to process a loan application are almost similar across all banks, however they may differ depending upon specific requirements and other factors. The following documents are required by financial institutions to process a loan application:

INDIVIDUAL

  • Proof of age

  • Proof of address

  • Proof of income of the applicant & co-applicant

  • Bank statements of the last 6 months

  • Passport size photographs of the applicant & co-applicant

SALARIED INDIVIDUAL

  • Salary slip / Form 16 A

  • A photocopy of the first and last pages of Ration card or copy of PAN/Telephone/Electricity bills

  • A photocopy of Investments (FD Certificates, Shares, any fixed assets, etc., or any other documents supporting the financial background of the borrower)

  • A photocopy of LIC policies with the latest premium payment receipts (if any)

  • Photographs (as applicable)

  • A photocopy of bank statements of the last six months

SELF EMPLOYED OR BUSINESSMAN

  • A brief introduction of Business/Profession.

  • Balance Sheet, Profit and Loss account and statement of income with Income Tax returns for the last 3 years certified by a CA.

  • A photocopy of Advance Tax payments (if applicable).

  • A photocopy of Registration Certificate of establishment under shops and Establishments Act/Factories Act.

  • A photocopy of Registration Certificate for deduction of Profession Tax (if applicable).

  • Bank statements of Current and Saving accounts for the last 6 months.

  • A photocopy of Certificate of Practice(if applicable).

  • A photocopy of any bank loan (if applicable).

  • A photocopy of the first and last pages of the Ration card or a copy of PAN/Telephone/Electricity Bills.

  • A photocopy of LIC policy (if applicable).

  • A photocopy of LIC policy (if applicable).

IF PURCHASED FROM BUILDER

  • A brief introduction of Business/Profession.

  • Balance Sheet, Profit and Loss account and statement of income with Income Tax returns for the last 3 years certified by a CA.

  • A photocopy of Advance Tax payments (if applicable).

  • A photocopy of Registration Certificate of establishment under shops and Establishments Act/Factories Act.

  • A photocopy of Registration Certificate for deduction of Profession Tax (if applicable).

  • Bank statements of Current and Saving accounts for the last 6 months.

  • A photocopy of Certificate of Practice(if applicable).

  • A photocopy of any bank loan (if applicable).

  • A photocopy of the first and last pages of the Ration card or a copy of PAN/Telephone/Electricity Bills.

  • A photocopy of LIC policy (if applicable).

  • A photocopy of LIC policy (if applicable).

IF PURCHASED FROM COOPERATIVE SOCIETY

  • Original share certificate of the society

  • Allotment letter from the society in the borrower’s name

  • Copy of the lease deed, if executed

  • Certificate of registration of the society

  • Copy of the byelaws of the society

  • No Objection Certificate from the society

  • 7/12 extract or property register card in the society's name

  • Copy of N.A permission for the land from the Collector

  • Search and title report (with the details of documents) for the last 30 years

  • Copy of order under the Urban Land Ceiling Act

  • Copy of building plans sanctioned by the competent authority

  • Commencement certificate granted by Corporation / Nagar Palika

  • Latest receipts of taxes paid

  • Original agreement to assign / deed of assignment.

IF CONSTRUCTION ON OWN LAND

  • Original sale deed of land and extract of Index II.

  • 12 extract or property register card in your name.

  • Copy of N.A. permission for land from the collector.

  • Search and title report (with the details of documents) for the last 30 years.

  • Copy of order under Urban Land Ceiling Act.

  • Copy of the building plans sanctioned by the competent authority.

  • Building permission granted by Corporation / Nagar Palika.

  • The latest receipts of taxes paid.

  • Estimate of cost of construction certified by the architect.

CONTACT FOR HOME LOAN

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