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Overview

Home Loan

Dreaming to buy a new home or a flat would always be the most important thing that anyone can wish for. But now, buying a new home, renovating, purchasing a land/plot for construction and everything is possible at LoanBazaarOnline.com.We at LoanBazaarOnline guide you to review and compare the different home loan rates and make the best choice that fulfills your dream as well as save your money. We also provide the benefit of processing the Home loan till disbursement at your doorstep.

Types of Home Loan Offered:

  • Loan on a Ready Construction Property
  • Loan on an Under Construction Property
  • Loan Taken Over from another Bank along with Top Up Amount
  • Home Loan Top Up
  • Loan on a Plot/Land Purchase
  • Home Loan Refinance

Who can be a Co-applicant for a Home Loan?

For a Home loan, the amount borrowed is usually quite huge in value. Hence, a joint applicant is often recommended along with the primary borrower in most of the situations to increase the loan amount eligibility. There are certain agreed relationships which will only be considered for joint eligibility. These include

  • Husband-Wife
  • Father-Son/Daughter (provided daughter is unmarried)
  • Mother-Son/Daughter (provided daughter is unmarried)
  • Brothers

How to apply for Home Loan?

Steps to avail a home loan include

  • Submission of loan application form with relevant documents
  • After checking of the application, the data is formally submitted to the bank authorities for further processing.
  • Applicant’s credit information report (Existing or previous loans & Credit cards) will be verified by the Credit Officer
  • Legal Valuation of the property pledged
  • After loan is approved & agreement is signed, loam amount will be disbursed.

NRI Home Loan

Owing a home in India for a NRI is now equally, subject to fulfillment of certain conditions. Any graduated Indian citizen who holds a valid Indian passport and stays abroad for employment or carrying out business are eligible for NRI home loans. The tenure for NRI home loan is restricted within the range of 5-15 years, beyond that is solely at the discretion of the bank and in exceptional cases only. There is a higher rate of interest charged on NRI home loans to cover the higher risk involved.

You need not wait for your trip to India to apply for a home loan. Many banks have the flexibility to apply through online and get the status update (or) can visit the nearby abroad branches to apply for home loans.

However, you will require executing a General Power of Attorney in favor of a resident Indian who would act on your behalf with the bank. If POA is issuing while you are abroad, it needs to be signed in front of the embassy official. The laon repayment will be made in Indian Rupees through the NRE/NRO account with remittance from abroad.

Eligibility

  • Salaried individual
  • Self employed individual
  • Self employed professional like doctor, chartered accountant, Architect etc.
  • Applicant should be above 21 years
  • Applicant should have a decent CIBIL credit score
  • Good repayment capacity with fixed & stable income source
  • Good financial stability no matter in which segment the applicant falls into.
  • Work for a stable company
  • Applicant should have a good stable bank account with prompt transactions
  • Applicant should have stable residential proof
  • For Construction loans proper property documents and in the case of house purchase a clear sale agreement.

Checklists

For Indian Resident

  • Identity proof.
  • Residential proof.
  • Properly filled loan application form.
  • Photograph.
  • Property Documents (Sale agreement, Sale deed, Building plan approval & Patta)
  • Last 6 months bank statement.
  • For business applicants – documents describing the type of business, and IT returns.
  • For salaried applicants – last 3 month's salary slips and From 16A.

For NRI

  • Identity proof
  • Residential Proof of Both India & Abroad
  • Photograph
  • Property Documents (Sale agreement, Sale deed, Building plan approval & Patta)
  • Passport copy
  • Valid Visa and work permit
  • Contract of employment
  • Work experience certificate
  • Salary certificate (If salary not credited to bank account, salary certificate to be attested from embassy)
  • Latest 6 months bank statement of NRE\NRO accounts
  • Copy of Employment card (in case of Middle East)

Tax Benefits on Home loans

If you are salaried, earning a reasonable income and living on rent, then you are missing a big opportunity of saving tax and building an asset. Any individual who pays the home loan EMI can claim tax deductions for Interest part as well as the Principal part to save up on a significant amount of money! Both the primary borrower and the co-applicant are eligible for tax exemption for your share of the EMI paid.

Benefit for the principal part of the EMI can be claimed to a maximum limit of Rs. 1,00,000/- per annum under the Section 80C of the Income Tax Act. Similarly, benefit for the interest part of the EMI can be claimed to a maximum limit of Rs. 1,50,000/- under Section 24 b.

Let’s take an example to understand the tax claim benefit while taking a home loan

Income Description Amount
Total taxable income (After standard deductions) Rs. 10,00,000/-
Principal Repayment (Home Loan) Rs. 1,20,000/-
Interest Repayment (Home Loan) Rs. 1,70,000/-
Total Deductions (Principal +Interest) Rs. 2,50,000/-
Net taxable Income Rs. 7,50,000/-

(Note: The taxable income deducted is Rs. 2,50,000/- which implies a direct saving of Rs. 75,000/- per annum @ 30% tax applicable in tat slab)

Benefits

  • Attractive interest rates on a monthly reducing basis.
  • Choice from fixed and floating interest rates.
  • Part–prepayment facility for zero fees.
  • Doorstep service till disbursement.

FAQs

1.When can I apply for a Home Loan?

You can for apply for Home Loan at anytime. You may apply for it after you have decided to acquire/construct a property, and even in case, the property has not been selected or the construction has not commenced, you can still apply. What's more, you can also avail for Home Loan facility if you want to renovate or expand your home.

2.How do I make an application?

You need to submit the application form along with the necessary documents. The bank, after going through your application will review it, ask questions wherever necessary and will also informally tell you the loan amount you are eligible for and the terms and conditions of the same and put across its decision to you. You are as always, advised to shop around for more than one bank so as to get better terms/larger loan amount/lowest interest etc.

3.How is my Home Loan eligibility determined?

Your Home Loan eligibility is determined by your repayment capacity, taking into consideration, factors such as: Your:

  • Income
  • Qualifications
  • Age
  • Spouse's income
  • No. of dependants
  • Stability and continuity of occupation
  • Assets/LiabilitiesM.
  • 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.

4.What are the types of home loans available?

These are a range of Home Loans available:

  • Home Purchase Loans: for the purchase of a new home.
  • Home Improvement Loans: for implementing repair works/renovations in a home that you have already purchased.
  • Home Extension Loans: for expanding/extending an existing home.
  • Land Purchase Loans: for purchase of land for home construction/investment purposes.
  • Home Conversion Loans: for those who have financed the present home with a home loan and wishes to purchase/move to another home for which some extra finances are required. In Home Conversion Loan, the existing loan is transferred to the new home including the extra amount required, eliminating the need for pre­payment of the previous loan.
  • Balance Transfer Loans: helps you to pay­off an existing home loan and avail the option of a loan with a lower rate of interest.
  • Bridge Loans: for people who wish to sell the existing home and purchase another. This loan helps you finance the new home, until you find a buyer for your old home.
  • Refinance Loans: helps you pay off the debt you have incurred from private sources like relatives/friends, for the purchase of your present home.
  • Stamp Duty Loans: is sanctioned to pay the stamp duty amount that needs to be paid on the purchase of property.
  • Loans to NRIs: to build/buy a home in India. EMI is payable till the loan is paid back in full. It consists of a portion of the interest as well as the principal.

5.How long does it take to get my application processed and the loan sanctioned?

It takes around 7days for processing of one's application if all the necessary documents are in order and takes another week for the bank to inspect the property papers and make the disbursement.

6.What security/collateral do I have to provide?

Banks usually take some additional securities which are called collateral securities. Collateral could be in the form of guarantee from one or two persons, assignment of life insurance policies, the surrender value of which should be equal to the loan amount, deposit of shares, and units or other securities. These additional securities are taken just incase 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 .

7.Can I take a Home Loan for construction in one city while working in another city?

Yes, you can take loan for construction in one city while working in another. The banks usually service this loan after getting details of the plot legally verified.

8.What is the range of interest rates offered?

The home loan interest rate varies from banks to banks and normally ranges from 10.25%

9.How is the interest rates calculated on my loan?

Most banks follow the yearly reducing­balance method, which accounts for your principal repayments only at the end of their financial year. As a result, you pay interest on the principal that you have already returned to the bank. The effective interest rate is therefore higher than the quoted interest rate by around 0.7%. Some banks may also follow the daily or monthly reducing- balance method, which results in a lower interest burden.

10.What are the bases of interest rates calculation?

The interest on Home Loans is usually calculated on Monthly Reducing or Yearly Reducing balance. In Monthly Reducing Balance, the principal on which you pay interest reduces every month as you pay your EMI. However in Yearly Reducing Balance, the principal is reduced at the end of the year, therefore you continue to pay interest on a certain part of the principal which you have actually paid back to the bank, which basically means the EMI for the Monthly Reducing system is effectively lesser than the Yearly Reducing system of calculating the interest.

11.What is the Fixed Rate of Interest?

Fixed Rate of Interest means that the interest rates remain FIXED for the entire duration the loan. This basically means that you do not benefit, even if the rates of interest drop in the market.

12.And Floating Rate of Interest?

This is the rate of interest that fluctuates according to the market lending rate.

13.What are the repayment period options?

The maximum period over which one can pay the loan varies for every bank, and is also different for every scheme. Also your residential status makes a difference. If you are a resident Indian, you could avail of a loan for duration of 25years. Few banks offer a 20­year repayment period, generally at a higher interest rate. As a Non­Resident Indian, you can only avail of a loan for a maximum period of 15 years.

14.Who can be a Co­Applicant?

A Co­Applicant(s) is/are the Co­Owners of the property in respect of whom the financial assistance has been sought. However all co­applicants need not be co­owners. Usually co- applicants are: husband/wife, father/son, mother/daughter etc.

15.Home Loans may also be accompanied by the following extra costs:

  • Interest Tax: is the tax payable on the interest paid on a home loan and not the principal. This tax is some times included in the interest rate of the loan, or may be charged separately as interest tax.
  • Commitment Fees: Some banks levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned.

16.What is the EMI?

EMI or Equated Monthly Installments refers to the fixed sum of money that you will be paying to the bank every month. The EMI comprise of both interest and principal repayment. The amount of the EMI depends on the quantum of loan, interest rate applicable and the term of the loan.

17.In how many installments can the loan be disbursed?

The loan can be disbursed in full or in suitable installments (normally not exceeding 3 months) taking into account the requirement of funds and progress of construction, as assessed by the bank.

18.Do I get a tax benefit on Home Loan?

Yes, you are eligible for tax benefits on the principal and interest components of the loan under the Income Tax Act, 1961. However as the benefits could vary each year, do check out the current benefits available.

19.Does the agreement for sale have to be registered?

Yes, and you are advised to do so too as the Agreement for Sale between the builder and the purchaser is required by law to be registered. You can register at the office of the Sub­registrar appointed by the State Government under the Indian Registration Act, 1908.

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