You can for appeal for Home Loan at any moment. You may submit an application for it after you have decided to acquire a property, and even in-case, the property has not been selected or the construction has not originated, you can still apply. What’s more, you can additionally avail for Home Loan facility if you want to modernize or expand your home.

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

Your Home Loan eligibility is determined by your re-payment capacity, taking into thought / attention, factors such as: Your:

• Income
• Qualifications
• Age
• Spouse’s income
• of dependants
• constancy & continuity of occupation
• Assets / LiabilitiesM.
• Savings history.

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

These are a wide range of Home Loans available:

• Home Purchase Loans: for the purchase of a brand new home.
• Home Improvement Loans: for implementing repair works/renovations in a home that you have already purchased.
• Home Construction Loans: for the construction of a new home.
• Home Extension Loans: for expanding an existing home.
• Land Purchase Loans for purchase of land for home construction or investment functions / 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 pre-payment of the previous loan.
• Balance Transfer Loans helps you to pay-off an existing home loan & avail the option of a loan with a lower interest rate.
• 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 or 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.

Some of the incentives offered by banks are:

• Loan sanction without requiring you to identify property as a pre-requisite for eligibility.
• Free accident or property insurance.
• Waiving of pre-payment penalty/processing fee.

How long will it take to get my app processed and the loan sanctioned?

It takes around 7 to 14 day’s for processing of one’s application if all the necessary documents are in order and takes another 1week for the bank to inspect the property papers and make the disbursement.

The maximum loan amount that you can borrow depends on factors such as:

• The purpose of the loan.
• Whether it’s for renovation or purchase of property.
• purchase of land for development etc.

Besides, your residential status (whether resident or Non-Resident Indian) will also be significant on the maximum quantum of loan that you can borrow. Generally Home Loans are provided for in the range of (75%-85%) of the cost of the property, as well as cost of land.

Banks sometimes take some additional securities which are collateral securities. Collateral may be in the form of guarantee from 1-2 persons, assignment of life insurance policies, the dedition value of which should be equal to the loan amount, deposit of shares, and units or alternative securities. These extra securities are taken just in case 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.

Yes, and you will have to insure that the property for fire and other suitable hazards, as required by the banks during the loan tenure. The banks are the recipient of the insurance policy. You will also have to produce proof / evidence, whenever mandatory by the banks. This is a cost that will add to the final cost of purchase of the property

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

The home loan interest rate varies from banks to banks and normally ranges from (12.5% to 16%).

Most banks follow the 365 day’s reducing balance method, which accounts for your principal re-payments only at the end of their financial yr. As a result, you pay interest on the principal that you have already returned to the bank. The valuable 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 rate of interest burden.

The interest on (Home Loans) is usually calculated on 30 day’s Reducing or 365 day’s Reducing balance. In 30 day’s Reducing Balance, the principal on which you pay interest reduces every month as you pay your EMI. However in 365 day’s Reducing Balance, principal is reduced in the end of the yr, therefore you continue to pay rate of interest on a certain part of the principal which you have actually paid back to the bank, which primarly means the EMI for the 30 day’s Reducing system is effectively lesser than the 365 day’s Reducing system of calculating the rate of interest.

Fixed Interest rate means that the interest rates remain FIXED for the entire continuation the loan. This basically / essentially means that you do not benefit, even if the interest rate drop in the market.

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

The maximum period over which one can pay the loan varies for every bank, and is also different for each scheme. Your residential status makes a distinction. If you are a resident Indian, you’ll avail of a loan for duration of 5-20 yrs. few banks offer a 20-yr re-payment period, generally at a higher interest rate. As a Non-Resident Indian, you can solely avail of a loan for a max time period of 7 yrs.

Yes, you can pay your loan in advance of schedule, if you want to. However, it should be noted that banks charge a fee for early redemption of loan. This fee can vary between 1-2% of the loan amount being pre-paid.

A Co-Applicant(s) are the Co-Owners of the property in respect of whom the financial assistance has been sought. However all co-applicants need not to be co-owners. Typically co-applicants are: husband or wife, father or son, mother or daughter etc

Banks charge fees at the time of application (processing fee) and at the time of loan sanction (administrative fees). The processing fee is either a fixed amount not linked to the loan or it may be a percentage of the loan amount. The loan amount received by you can be less than the processing fee. And as for the administrative fee, 1% of the loan amount sanctioned will have to be paid. Both the process fees & administration fees are payable up-front.

• Interest Tax: is the tax payable on the interest paid on a home loan and not the principal. This tax is sometimes included in the rate of interest of the loan, or may be charged separately as interest tax.
• Commitment Fees for 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.
• Miscellaneous costs: It’s somewhat possible that some banks may levy a documentation or consultant charges

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 30 day’s. The EMI comprise of both interest & principal re-payment. The amount of the EMI depends on the quantum of loan, interest rate applicable and the term of the loan.

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.

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 yr, do check out the current benefits available.

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 Sub-registrar appointed by the State Government under the Indian Registration Act (1908).

Each bank has its own list of needed documents that one must submit at the time of application. The same documents that the banks require at the pre-approval stage are:

• Photograph passport size.
• Age proof.
• Copy of Bank A/C statements for the last 6 months.
• Copy of latest credit card statement.
• Verification of signature from your banker.

If you are self-employed you require:

• Your business documentation / track record.
• Copy of audited financial statements for the last 2 yrs.

If you’re salaried, you need:

• TDS certificate and Salary
• Latest 30 bay’s pay slip.
• Letter from employer.

And at the disbursal stage (for property already located), you have to submit the following:

• Allotment letters.
• Photocopies of title deeds.
• Encumbrance certificate.
• Agreement to sell.

For self-construction:

• Approved plans & permission certificates along with estimates.