- Buy your dream home with an affordable home loan.
- Getting a home loan to buy your own house is one of the most important financial decisions in your life. You can get a home loan from three types of lenders in India – the Banks, Housing Finance Companies and Non Banking Financial Companies.
- Most of the lenders provide 80% – 90% of the cost of the property. The remaining needs to be paid as a down-payment by the borrower.
Home Loan types
Purchase of Flat or House
This is the most common type of home loan and is for those clients who want to buy a new residential property or resale residential property.
These loans are taken by individuals who wishes to renovate their existing home.
Home Expansion / Extension Loans
These loans are taken by individuals who are interested in the expansion of their particular property. Expansion can include construction of the new room, a floor, balcony, etc.
Home Loan Transfer
If you are paying EMI on your Home Loan which is significantly more than that available in the market, then it is time to transfer your loan to another financier.
It differs across lending institutions and loan schemes. However, common set of housing loan eligibility criteria is given below:
- Nationality: Indian Residents and Non Resident Indians (NRIs)
- Age Limit: 21 – 70 years
- Work Experience: Minimum 2 years (for salaried)
- Business Continuity: Minimum 3 years (for self-employed)
- Minimum household Earning: Rs. 50,000 per month (varies across lenders & locations)
- Loan amount: Up to 90% of property value
Loan Fees and Charges
Depending on the type of loan you are applying for, the following charges may be levied:
- Processing fees: This is a one-time non-refundable fee that is to be paid to the loan provider after the loan application has been approved. The processing charge varies depending on the Financier and the loan scheme you are applying for.
- Prepayment charges: Prepayment penalty is the fee you will have to pay the lender if you plan on repaying your loan before the completion of the loan tenure.
- Conversion fees: Some financiers also charge a conversion fee when you decide to switch to a different loan scheme in order to lower the interest rate associated with your current scheme.
- EMI bounce charges: When the EMI by the borrower is found to be bounced due to reasons such as insufficient funds in the borrower’s account, this fee is levied by the loan provider.
- Property Insurance: The premium should be paid directly to the concerned company during the term to ensure that the insurance policy is running during the loan tenure.
- Statutory/regulatory charges: The fee includes all charges associated with Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), Memorandum of Entry and Deposit, and stamp duty (varies from state to state).
Features & Benefits
Avail Tax benefits on Loans
Enjoy tax benefit of up to Rs 2 lakh on the Interest Amount and up to Rs 1.5 lakh on the Principal Amount under section 24 and section 80C respectively, of the Income Tax Act.
Improve your credit score
If you pay your EMI on time every month, then you will see an increase in your credit score within a year itself.
Investing in properties has a great potential as the value of a property only increases over the long-term period. Buying a home is like an investment to increase your profits over time.
High repayment Tenure
Among all types of loan, home loan has the longest repayment tenure which goes up to 30 years, so one can reduce the burden of equated monthly installments by extending the tenure.
Frequently Asked Questions!
Banks/financial institutions consider the following factors when determining your loan eligibility:
- Annual Income
- Occupational stability
- Resident type [ Indian Citizen, Non-Resident Indian (NRI),]
- Number of co-applicants
- Co-applicants’ income
- Credit score
Other ongoing loans, if any
- The rate of interest associated with fixed rate loans remain unchanged during the entire tenure of the loan. On the other hand, the interest rates applicable on floating rate loans can be revised from time to time depending on the RBI key policy rates. The equated monthly instalments can increase or decrease depending on the prevailing RBI rates in the case of floating rate type loans.
- Yes, you can choose to prepay your outstanding loan amount either partially or in full before the completion of your loan tenure. While banks do not charge any prepayment fee on floating rate loans, fixed rate home loans attract a penalty up to 2% of the loan amount if prepaid through refinance.
- Yes, you can avail tax benefits on both the interest and principal component paid against your home loan. As per Section 80C of the Income Tax Act, you can avail deductions up to Rs.1.50 lakh on the principal amount repaid annually. Under Section 24 of the IT Act, taxpayers are also eligible for benefits up to Rs.2 lakh on the interest repaid against a home loan annually.
- Pre-EMI is defined as the interest that is to be paid to the loan provider until the entire loan amount is disbursed. The Pre-EMI is payable on a monthly basis until the last disbursement, post which the regular EMI will be applicable comprising the principal and interest components.
- Home Purchase Loan: Suitable for those looking to purchase a new house/flat or an under-construction property.
- Home Construction Loan: Can be availed by those looking to construct a house/property according to his/her plan.
- Plot Loan: Can be availed by eligible borrowers looking to purchase a residential plot for the purpose of construction of a house/dwelling unit.
- Home Improvement Loan: These loans are sanctioned to those looking to repair/improve/renovate an already existing property.
- Home Extension Loan: Suitable for those looking to extend/expand/alter the structure of an existing property.
- Home Loan Balance Transfer: Can be availed by those who wish to transfer their outstanding home loan balance from their existing lender to another lender due to reasons such as reduced interest rates or better customer service.
- Home Loans for NRIs: These home loans cater to the housing needs of NRIs. They also include OCIs.
- Yes, you can switch from a fixed to floating rate of interest on your home loan during the repayment tenure. However, you will be charged a conversion fee by the lender in such cases
- The loan repayment period begins only after the loan provider has disbursed the entire home loan amount. However, you will be required to pay the interest i.e. pre-EMI on the partially disbursed loan on a monthly basis, in most cases.
- Yes, you can take 2 home loans at the same time provided that your lender approves your eligibility to manage 2 Equated Monthly Instalments (EMIs) at the same time. However, the tax benefits on the second house will be different and you will be required to establish the property as self-occupied or let-out property.
- No. Banks/financial institution do not grant 100% of the property value as home loan. Home loan lenders establish a margin on their loan i.e. the percentage of the cost that the lending institution will be covering. For example, if the margin on the loan is set at 10%, the bank will cover 90% of property value. In such cases, you will be required to a make a down payment of the balance amount, i.e. 10% in order to cover for the rest of the cost.
- When determining your home loan eligibility, the lender makes sure that your monthly repayments are not being affected by any other ongoing loans such as personal loan, two-wheeler loan, etc. However, other ongoing loans ultimately tend to affect your eligibility as your overall spending power is reduced. If your other loan commitments exceed 50%-60% of your monthly income, your home loan application may be rejected.
- If you are buying a house, home loan is the best option. Usually you will not be eligible for a personal loan for as high an amount required for the purchase of a house. If you want extra money for non-specific personal needs, then go for a personal loan. Home loans also have an added advantage of top-up loans wherein you can request a top up on your loan amount to cover additional needs such as furnishing your house.
- No, you cannot avail two home loans for the same property. Any such practice will be considered fraudulent. The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) ensures that fraudulent practices such as availing two housing loans for the same asset/property are prevented.
- A joint home loan can be availed by adding a co-applicant such as your spouse, parents, or an immediate family member on your application. Adding a co-applicant will increase your home loan eligibility as the lending institution will also be considering the co-applicant’s income and credit score when determining your loan eligibility. All co-owners of the property are required to be the co-applicant for a loan. However, the co-applicants need not necessarily be the co-owner of the concerned property.
- The co-applicant can be an immediate family member such as your spouse, your parents or even your major children. It is also mandatory for all co-owners of the property to be co-applicants while applying for a loan. However, the co-applicant need not be a co-owner