What is Home Loan?
Home loans are given to individuals who are interested in buying/constructing houses. It is supported by banks or financial institutions who loan a certain amount, based on the need of the individual(s). Loans can be applied for purchase, construction or improvement of homes.
Characteristic of Home Loan
- The asset i.e. your home/property is pledged as security collateral. In case of failure of payment of the loan on a timely basis, the bank/lender would be entitled to retrieve the asset.
- The loan amount varies, with minimum amount being Rs 2,00,000/-
- The repayment time period, which ranges upto 30 years, is fixed based on the amount taken as loan and includes the outstanding principal plus the interest costs.
- The principal amount and the interest together constitute the EMI (Equated Monthly Installment) of the loan.
- The loan charges include registration charge, fee for processing, prepayment penalty, commitment charge and miscellaneous charges for documentation & consultation.
Types of Home Loan
There is a home loan for every requirement, take a look:
- Home Purchase Loans
- Land Purchase Loans
- Home Construction Loans
- Home Improvement Loans
- Home Conversion Loans
- Home Extension Loans
- Bridge Loans
Documents Required for Home Loan
- Duly signed and filled application form
- Passport-size photograph
- Statements of investments, if any
- Copy of plan approved for the proposed construction/extension
- Cost estimation or valuation report from the bank's (or finance company's) panel CA
- Allotment letter of housing board/NOC of the society/builder etc.
- Bank statement and salary slips
In addition to these, you will have to also submit the following documents:
- Identity and signature proof - Passport, Pan card, Driving License, Voter ID card, Aadhar card, employee identity card in case of government employees.
- Address Proof - Bank statement, Rent Agreement, Voter ID card, Ration card, Passport, Driving License, telephone/electricity/water/credit card bill or Property tax.
- Age Proof - Voter ID card, Secondary school leaving certificate (class 10), birth certificate, Passport, Aadhar Card, pension payment order or receipt of LIC policy.
How we can help?
As one of the leading loan & finance based comparison portals in the country, RuLoans provides you with an unbiased platform to analyze and decide upon the available deals in the market.
Moreover, our Home Loan Calculator helps you to view the various types of home loans you are eligible for, analyzing details of your Monthly Income / Gross Yearly Income, Existing EMI, Rate of Interest and Loan tenure. Adding to that, we also help you with information about the said criteria, options for repayment, different types of interest rates and likewise.
As all banks and financial institutions have different criteria or specifications, it is important that you first check and analyse which ones you are eligible for. Our rule based calculator informs you about the eligibility criteria, repayment options, interest rates types,processing fee etc. thus helping you in selecting higher loan amounts at lower EMIs, i.e. LMIs.
As mentioned earlier, the home loan eligibility is determined by various factors including income, employment status, loan tenure and so on.
- Any Indian citizen in good standing who is salaried, self-employed or business person with regular source of income can apply for a home loan.
- The applicant should be above the age of 21 years
- Professional stability and savings history play a major role in approval of the loan
- Bad credit history would prove to be a put-off, especially anytime within 3 months prior to applying for home loan.
- For Business men and Self-employed individuals, the value of loan you are eligible for is majorly determined by the profits and turn over earned by you.
What is floating rate home loan?
For floating rate home loan, the rate of interest varies with the market conditions. They are tied up with a base rate plus a floating element added to it. Floating rate home loans are usually 1-2% cheaper than the fixed rate home loan.
What is a fixed rate home loan?
Repayment of home loans in fixed equal installments over the period of the loan are categorized as Fixed Rate Home Loans. These rates do not change even with change in market conditions or with changes in loan rates by RBI.
How to repay my loan?
- Issue post-dated cheques for the tenure of the loan.
- Deduction of amount from the salary
- Deduction of the EMI directly from the bank (ECS)
Is prepayment of loan allowed?
Lump sum payment can be made. But in such cases, banks may charge a penalty of the range of 2-3% of principal amount standing subject to Terms and Conditions mutually agreed at the time of signing loan agreement. On the other hand, many banks do not charge that too, if the EMI are paid periodically
What are the other charges included in the home loan process?
- Processing Fee – for processing charges of the application
- Commitment Fee – fee for unused credit line or undisbursed loan
- Pre-payment Charge- for pre-payment of loan
- Miscellaneous charges – documentation and administration charges
What are the documents required for home loan?
Though required documents vary from vendor to vendor, some of the major documents needed are as -
- Completed loan application
- Passport size photographs
- Identity proof – Passport/Drivers License/Voters ID Card/PAN Card/Adhar Card/Employee Id
- Residence proof- Telephone or Electricity bill/Water bill/Passport/Voters ID Card /Property tax receipt
- Bank statement and salary certificates
- Statements of investments, if any
- Copy of plan approved (Local Municipal Corporation) for the proposed construction/extension
- Cost estimation/valuation report from Bank's panel Charted Engineer
- Allotment letter of housing board/NOC of the society/Builder etc.
Is there any tax benefit?
The tax benefit on home loan is divided into two sections-
- Repayment of the principal amount- It is considered under Income Tax Section 80C with a maximum tax deduction of Rs, 1,50,000.
- Repayment of the interest rate on home loan- You can avail the tax benefit on the amount to interest paid on home loan to a maximum limit of Rs. 2Lakhs, under Section 24 of Income Tax Act
What is an amortization schedule?
Amortization schedule is a table showing amount of principal and the amount of interest that comprise each payment so that the loan will be paid off at the end of its term. The percentage of each payment that goes toward interest diminishes a bit with each payment, and the percentage that goes toward principal increases.The interest rates differ based on the profile of the customer.
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