Your Home is a place where you relax after coming back from your day’s tiring work, it is that place where you can give time to your family & spend beautiful moments with them. To acquire a home which can be christened your “Own House” is a life-time decision & has to be taken with a lot of planning & requires huge finances. Your Dream Home is not very far away with a Home Loan which will fulfill your Dream into a reality. We at rupaiyavasool are working constantly to get you the BEST Loan Deal & have brought a small guide which would answer some important questions related to Home Loan & help you decide your loan deal.
What is a Home loan?
Home Loan is a Secured Loan offered against the security of a house/property which is funded by the bank’s loan, the property could be a personal property or a commercial one. The Home Loan is a loan taken by a borrower from the bank issued against the property/security intended to be bought on the part by the borrower giving the banker a conditional ownership over the property i.e. if the borrower is failed to pay back the loan, the banker can retrieve the lent money by selling the property. Get more Information on home loan section click Articles about Home Loan and Home Loan must read.
Most borrowed home loans
SBI Home Loan: Before borrowing any loan borrower compare interest rates. Generally people prefer to take SBI Home Loan because SBI (State bank of India) is main centralized and national bank. SBI provides loan at comparatively low interest rate.
HDFC Bank Home Loan: HDFC stands for Housing Development Finance Corporation. This unit is for housing development. HDFC provides loan and low interest rate. And you are facilitated with ease repayment option. HDFC gives you an option of easy EMI. Because of flexible feature and transparent policy, most people prefer HDFC home Loan for their requirement.
ICICI Bank Home Loan: ICICI Bank offers a wide range of Home Loan products, designed to meet the requirements of customer. : ICICI Bank offers Doorstep service, Speedy loan sanction, Simplified documentation and Loan amounts ranging from Rs. 2 lakh to Rs. 3 crore Rupees only.
Types of Home Loan
There are different types of home loans available in the market to cater borrower’s different needs.
• Home Purchase Loan : This is the basic type of a home loan which has the purpose of purchasing a new house.
• Home Improvement Loan : This type of home loan is for the renovation or repair of the home which is already bought
• Home Extension Loan : This type of loan serves the purpose when the borrower wants to extend or expand an existing home, like adding an extra room etc.
• Home Conversion Loan : It is that loan wherein the borrower has already taken a home loan to finance his current home, but now wants to move to another home. The Conversion Home Loan helps the borrower to transfer the existing loan to the new home which requires extra funds, so the new loan pays the previous loan & fulfills the money required for new home.
• Bridge Loan : This type of loan helps finance the new home of the borrower when he wants to sell the existing home, this is normally a short term loan to the borrower & helps during the interim period when he wants to sell the old home & want to buy a new one, It is given till the time a buyer is found for the old home.
• Home Construction Loan : This type of loan taken when the borrower wants to construct a new home.
• Land Purchase Loan : It is that loan which is taken to purchase a land for construction & investment purposes.
Documents required in Home Loan
Generally the documents required to processing 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:
• 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
• Employment certificate from the employer,
• Copies of pay slips for last few months and TDS certificate
• Latest Form 16 issued by employer Bank statements
In case of Self-employed
• Copy of audited financial statements for the last 2 years
• 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
• Profit and loss account for the last few years
• Income tax assessment order
Home Loan Process & various steps involved
There are various steps involved in getting a Home Loan from selecting your property to filling up the loan application. Following are the various stages in Home Loan:
• The first step involved in the process is to find your property which is followed by the verification of property documents, post that the documents are examined & simultaneously you can start searching for the lender who can offer the BEST Home Loan Deal after checking your eligibility criteria.
• Know the Home Loan Eligibility : Banks offer the loan amount only after checking your profile & based on various eligibility criteria’s like age, income & salary banks lend you the money.
• Select the Best Home Loan after evaluation: Comparing home loan interest rates is the primary feature in the home loan selection, however other fees & charges like Application fees, processing fees, legal charges should not be neglected when comparing various loan offers. To check the interest rates & other charges incurred by various banks, rupaiyavasool has brought in a Home Loan Comparison Chart across various Banks.
• Applying for the Loan : After you have selected your lender, you have to fill in the application form wherein the lender requires complete information about your financial assets & liabilities; other personal & professional details together with the property details & its costs.
• Documentation & Verification Process : You are required to submit the necessary documents to the bank which will be verified together with the details in the application.
• Credit & default check : Bank checks out the borrower’s loan eligibility (through repayment capacity) & the amount of loan is confirmed. The borrower’s repayment capacity is reached which is based on the income, salary, age, experience & nature of business etc. Bank also checks credit history through the Cibil Score which plays a critical role in deciding & approving your loan application. Low Credit Score implies that the bank upfront rejects your application on the basis of earlier credit defaults; on the other hand high credit score gives a green signal to your application.
• Bank sanctions Loan & Offer letter to the borrower : After the credit appraisal of the borrower bank decides the final amount & sanctions the loan, the bank further sends an offer letter to the borrower which constitutes the details like rate of interest, loan tenure & repayment options etc.
• Acceptance Copy to the Bank : The borrower needs to send an acceptance copy to the bank after the borrower agrees with the terms & conditions in the offer letter.
• Bank checks the legal documents : The bank further asks the legal documents of property from the borrower to check its authenticity so as to keep them as a security for the loan amount given. The next step involved is the valuation of the property by the bank which determines the loan amount sanctioned by the bank.
• Signing of agreement & the loan disbursal : The borrower signs the loan agreement & the bank disburses the loan amount.
Charges in Home Loan
Acquiring a Home Loan doesn’t only involve the cost of home loan interest rates but it also includes other charges & fee accompanying at various stages of taking the Home loan. You must consider all these charges while comparing the cost structure across banks. Following is the detailed fee structure incurred by banks at different loan stages:
• Processing Charge : It is a fee payable at the time of submitting the loan application to the bank which is normally non-refundable. The fee ranges between 0.5 per cent and 1 per cent of the loan amount.
• Administrative Fee : It is a fee incurred by banks at the time of loan sanction; there are few banks who have removed this fee so you must check it with all the banks.
• Prepayment Penalties : When the borrower pre-pays the loan before the loan tenure, banks charge a penalty which usually varies between 1 per cent and 2 per cent of the pre-paid amount.
• Legal Charges : Banks also incur some charges from the customer for legal and technical verification of the property.
• Delayed payment Charges : When there is a delay in the payment of your EMI, banks charge a late payment fee from the borrower which normally ranges from 2% to 3% of the EMI.
• Cheque bounce charges : Banks charge between Rs. 250 and Rs. 500 for every bounced cheque towards the loan payment because of lack of funds in your account. Home Loan Criteria by various banks
The borrower’s eligibility of getting a home 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. You can now check your eligibility for Home Loan through our Home Loan Eligibility Calculator rupaiyavasool has brought in the Home Loan Eligibility Factors by banks
Important Pointers in Home Loan
• Increase your Loan eligibility
• Credit History : Your chances of getting a home loan are increased if you have a good credit history which is known by banks by checking the borrower’s Cibil score. Now it is very hard to get a loan from another bank when you already have a bad debt with one bank.
• Clubbing of income : Your eligibility to take a home loan will augment when you club your income with your spouse’s income, bank in this case will calculate your eligibility on the basis of the clubbed income of both the applicants. You can club incomes of spouse, children & parents staying with you and having regular income.
• Enhance your loan tenure : Longer is the loan tenure, lower will be the EMIs which further increases the repayment capacity of the borrower & in turn enhances the loan eligibility.
• Step-up Loan: In this type of loan EMIs remain low in the beginning & increase gradually as and when the borrower’s spending power increases. Therefore lower EMIs in the initial years enhances the borrower’s ability to pay & further increases the loan eligibility
• Increase the down payment : You must know that in a home loan bank finances only 85 to 90% for the property & the rest amount has to be funded by the borrower. You should increase the down payment if you have more than required amount which will mitigate your debt considerably.
Tax Benefits in Home Loan
The home loan borrower enjoys Tax Benefits on both Interest paid & the Principal re-paid. Under Section 24(d) of Income Tax, the deduction of interest payable on the home loan is up to a maximum of Rs. 2, 00,000.
Under Section 80(c) of Income Tax, Principal amount for the repayment of loan along with other savings & investments is eligible for tax deduction up to a maximum limit of Rs. 1, 00,000. Home loans can be used to buy new property, 2nd sale property as well as under construction property. Banks generally provide 80% to 90% of the property value as a home loan. The balance has to be arranged as the initial down payment to the builder/ seller. One can arrange the balance from savings, securities, fixed deposits, life insurance or through a personal loan. Nowadays some builders provide fully furnished flats to enable higher loan amounts. This also reduces the cost of furnishing the house on possession.
Indicative rate of interset for a 20 year loan would be: Floating Rate 7.95% to 10%The above rates are purely indicative.The actual rates that you can get from the bank depends on various factors like income, profile, turnover, repayment history, builder track and negotiating power etc.Process… Home Loan Process Once you decide to invest in a home, you can apply for a Home Loan. Yes, even before you have selected the property.
Rupaiyavasool.com helps you to get the best rates in Delhi NCR. Various stages in a Home loan process is basically divided in three stages:
1 Pre-Approval
2 Legal and Valuation
3 Disbursal
Pre-Approval
This is basically an individual credit approval based on the financials and Personal Identification documents like Photographs, Photo Identity, Signature Proof, Date of Birth Proof, etc.
Legal and Valuation
In This process the property documents are examined by the banks valuer who checks the legality of the documents and evaluates the market value of the property.
Disbursal
This is the final stage wherein the customer gets the disbursement after submitting all the original documents as per the valuation report and signing of the agreement between the bank and the applicants of the loan. Refinancing is also possible within 6 months from the date of purchase of property .
Eligibility…
How is Eligibility Calculated?
Various factors are taken into account when assessing the repayment capacity. Income, age, number of dependants, qualifications, assets and liabilities, stability/ continuity of employment / business and subject to maximum provided by the bank, to name some factors.
How can eligibility be increased ?
Your spouse can be a co-applicant if he/she is earning. The incomes can be clubbed to enhance your loan amount.
You can also include Parents/Children as Co-Applicants for higher eligibility.
Additional securities like bonds, fixed deposits and LIC policies may also help to enhance eligibility .
Who can apply for a Home Loan ?
Salaried Individuals
Self employed
Professionals/Business men
NRIs
Requirements.
Min Age should be 21 years when the loan is sanctioned .
The loan tenor is from 5 years – 25 years subject to a maximum till 58/60 years or retirement ,whichever is earlier in case of salaried and for selfemployed before 65 years.
The final amount to be sanctioned will depend on the repayment capacity and the maximum provided by the lending bank.
CO-Applicant can be taken for overcoming the age barrier as well. What are the Features of Home loan ?* Attractive interest rates.
* Door-step service from enquiry till loan disbursal.
* Balance transfers from other banks possible.
* Maximum loan 80/90% of the cost of the property (including the cost of the land) and based on the repayment alignment of the customer.
* Floating and Fixed Home Loan Interest available.
Fixed Rate
* Floating Rate Home LoanLoan under Floating/Adjustable Rate is linked to Retail Prime Lending Rate rates of banks.
The Rate of interest will be revised every time there is a change in Retail prime lending rate .
Generally the EMI is retained and the tenor of the loan is increased /decreased as applicable.
* Fixed Ratecurrently some banks are offering fixed rates only for 3-5 years.
Repayment
Repayment is normally done through Equated Monthly Instalments (EMIs) comprising both principal and interest. Normally post dated cheques (PDC) are taken in advance ranging from 12 months onwards
Documents Required.The following documents needs to be submitted for Pre-Approval * Application form with photograph.
* Identity and Residence Proof.
* Latest 6 months Salary-slips-for salaried.
* 3 years I T Returns-for self employed.
* Education/Qualification Certificate.
* Proof of business existence- min 3 years..
* Form 16/ Last 3 years Income Tax returns.
* Business profile .
* Last 6 months bank statements.
* Processing fee cheque for valuation payable to the bank.
Fees
Currently ranges from 0.5%- 1% of the loan amount applied plus applicable
service taxes and cessPart Payment/Prepayment.Part /Prepayment of loan is possible. Charges vary from bank to bank.
FAQ…
For what purpose can I avail a home loan?
You can take a loan for constructing a house, purchasing of a ready possession house / flat or a flat in resale, takeover of existing loans from approved banks / housing finance companies, the purchase of a plot of land, for renovation of and extension of the house.
Who can avail of the loan?
Salaried individuals, Self employed professionals or businessmen and individual NRI’s.
Who can be a co-applicant for the loan?
All co-owners need to be co -applicants.
Spouse/parents/children can be co-applicants and his / her income can be clubbed to to enhance The loan amount.
What security is to be provided?
Security for the loan is a first mortgage of the property to be financed, by way of deposit of title deeds / or such collateral security as may be necessary.
The title to the property needs to be clear, marketable and free from encumbrance.
There should not be any existing mortgage, loan or litigation, which is likely to affect the title to the property adversely.
Can loan be repaid ahead of schedule?
Yes, the loan can be paid ahead of schedule, however if the loan is prepayed or transferred to another bank or HFC, a nominal fee @ 2% of principal outstanding is charged
Are the Bank policies subject to change?
Yes. These policies are reviewed periodically.
How is the loan repaid?
An EMI refers to an equated monthly instalment. It is a fixed amount which one pays
every month towards the loan. It comprises of both, principal repayment and intrest payment.
What is an EMI?
An EMI refers to an equated monthly instalment. It is a fixed amount which one pays every month towards the loan. It comprises of both, principal repayment and interest payment.
When does the repayment start?
EMI payments start from the month following the month in which the full disbursement has been made.
What happens in case if a PDC bounces?
In the case of a bounced cheque or delayed payment, charges and outstanding dues
will be charged as per the prevailing company policy.
What is pre-EMI interest?
In the case of part disbursement of the loan, monthly interest is payable only on
the disbursed amount. This interest is called pre-EMI interest (PEMI) and is
payable monthly till the final disbursement is made, after which the EMIs would commence.
What is the minimum /maximum loan amount?
Home loan are available from 5 lakh to 25 crores.
What is the time frame for a loan to be approved?It takes a 7/10 working for the loan to be sanctioned after submission of all all documents.
When is the loan disbursed?
The loan will be disbursed on:
– Submission of the legal documents.
– Legal and technical clearance of the property
– Submission of Registered copy of agreement.
What is an amortization schedule?
An amortization schedule is a table giving the reduction of the loan amount
by monthly installments. The amortization schedule gives the breakup of every EMI towards repayment of interest and outstanding principal of loan.