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What is Home Loan

A mortgage loan known as a Home Loan stands for the amount of money borrowed from a Bank or a NBFC to purchase a home. The loan amount must be repaid with interest over a period known as the home loan tenure, which ranges from 10 years to 30 years depending on the terms and conditions of the loan. The repayment generally takes place in Equated Monthly Instalments, and your home becomes collateral as security against default until the loan tenure expires.


Different Types of Home Loan

Home Loans are popular with people for several reasons, including that such tax benefits are available on such loans. Some of the popular types of loans are briefly discussed below:

  • Home Loan

    The most common type of loan you can avail to purchase a home, may be termed as a home loan. Housing finance companies and both public and private banks, offer such loans for purchase of new or pre-owned homes at affordable interest rates, and flexible loan tenures.

  • Acquisition of Land

    Most financial institutions offer loans for purchase of land. This flexible option allows the buyer to save funds and construct a home on the land. This also allows the buyer the flexibility of using the purchased land as an investment. Several lenders sanction land purchase loans of up to 85% of the market value of the land.

  • Home Construction

    A home construction loan plays an important role when you want to construct a home of your own, rather than buying a pre-constructed home. The loan takes into account the value of the plot, and plot must have been purchased within the same year to find inclusion in the home construction loan amount. You need to submit a rough estimate of construction cost to decide the amount of the loan.

  • House Expansion or Home Extension

    There are times when you wonder how you can avail funds for works such as adding an extra bedroom, or balcony, or other such modification to your existing home. Numerous financial institutions offer such home expansion or extension loans, specially designed for circumstances such as this.

  • Home Conversion

    There are times when you want to move into a new home from your existing home for which you have a loan for several personal reasons. At such times, you may avail a home conversion loan, which gives you the flexibility to transfer your current loan balance on the previous home to your new home.

  • Home Improvement

    Lending institutions such as banks and NBFCs offer home improvement loans that you can use to repair, paint, construct, and modify your existing home. Should you lack funds for such types of improvement, you have the option to avail a home improvement loan.

  • Balance Transfer

    Market fluctuations might cause loan interest rate changes that you may want to take advantage of to save money. You may at such a point opt for a home loan balance transfer to benefit from reduction in interest rates. This facility allows you to transfer you current home loan balance to a new lender who offers you better rates of interest.

  • NRI Home Loans

    Non-Resident Indians may also avail home loans designed for NRIs to purchase property in India. The application procedures and formalities may be slightly different, but availing such a facility comes easy.

  • Bridged Loans

    A bridged loan may be termed as a short-term loan designed for you when you plan to purchase new property, while awaiting a buyer for your existing home. Your lender will require you to mortgage your new house for an extended period.

  • Stamp Duty Loan

    A stamp duty loan offered by various financial institutions gives you the freedom to cover stamp duty charges for the purchase of a property.


Benefits of a Home Loan

Home Loans are popular with people for several reasons, including the reasons that you can avail such loans for purchase of land and residential property, and for construction and other purposes. Both Banks and NBFCs offer home loans that feature benefits such as mentioned below

  • Tax Benefits

    When you avail a home loan, you avail tax benefits offered with your loan as well. You can claim income tax deduction on interest and principal repayments. You can claim up to Rs.1.5 lakh on principal repayments u/s 80C, up to Rs.2 lakh on interest repayments u/s 24B, up to Rs.2 lakh on interest repayment in special circumstances u/s 80EE and 80EEA, and up to Rs.1.5 lakh on stamp duty expenses u/s 80C.

  • Low Rate of Interest

    As a rule, most financial institutions offer home loans at much lower interest rates than offered on other available types of loans. Some lenders even offer home loan top up facilities at lower interest rates on existing loans, which enable you to overcome cash crunches.

  • Due Diligence of Property

    Your application for home loans runs through several process, one of which includes due diligence. The due diligence process verifies and validates documents related to you property, thereby reducing the risk of being fooled by fraudsters and cheater. Approval and disbursal takes place only after the due diligence of property.

  • Long Repayment Tenure

    Home loans are generally high value loans, and lenders typically offer home loans with longer loan tenures. This helps, since a long period for repayment of loan extends the loan amount for that period leading to low EMIs, which can be planned.

  • No Prepayment Penalty

    Many financial institutions also offer you home loan foreclosure or prepayment facilities without having you to pay prepayment charges or penalties. This gives you the opportunity to prepay you home loan when you have the required funds. This helps you reduce debt burden.

  • Balance Transfer Facility

    A home loan balance transfer enables you to transfer your current outstanding home loan balance from your existing lender to a new lender to avail benefits such as interest rates, service charges, etc. This facility also allows you to reduce your debt burden.

  • Insurance Cover

    Insurance cover keeps your loved ones protected when unfortunate incidents occur. Home loans are subject to property insurance, and costs related to insurance must be borne by you along with your home loan EMIs.

  • Complimentary Value- Added Services

    A host of complimentary offers and benefits to keep you in good financial health are offered by various banks and NBFCs, which you can avail when you plan your home loan.

Eligibility Criteria

Home Loan Eligibility Criteria

Home loans are secured forms of credit advances that may be availed for purchase of residential property, purchase of land, home construction, repair, and renovation. To qualify for this form of credit, you need to fulfil eligibility criteria prescribed by your lender. Following are the basic eligibility required by most lenders.

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    You must be above 21 years of age at the time of the commencing of your loan, and up to 65 years or less at home loan maturity

    • Salaried Person - 21 years to 58 years
    • Self-Employed Person - 25 years to 65 years
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    • Salaried Person - Minimum Rs. 10,000 per month
    • Self-Employed Person - Minimum Rs. 2,00,000 per year
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    • Salaried Person - Minimum 2 to 3 years Experience MNC, or a Private or Public limited Company
    • Self-Employed Person - Minimum 3 years Experience in current field
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    CIBIL Score

    Typically, a credit score of 750 may be considered a good score for approval


Home Loan Documentation

Documents you need to keep handy to prove your eligibility for a Home Loan

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    Application Form

    Application Form - Completely Filled-Out with Signatures

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    3 Passport Sized Photographs

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    Identity Proof

    • Aadhaar Card
    • PAN
    • Voter ID
    • Passport
    • Driving License
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    Proof of Age

    • Any of the above Identity Proof with Permanent Address
    • Birth Certificate
    • SSC School Leaving Certificate
    • Bank Passbook
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    Residence or Address Proof

    • Any of the above Identity Proof with Permanent Address
    • Electricity Bill
    • Telephone Bill
    • Post-Paid Mobile Phone Bill
    • Water Tax Receipt
    • Property Tax Receipt
    • LIC Policy Receipt
    • Recognized Public Authority Verification Letter
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    Property Documents required for Home Loan

    • Sale Deed
    • Stamped Agreement of Sale
    • Allotment Letter
    • No Objection Certificate or NOC
    • Housing Society
    • Builder
    • Possession Certificate
    • Land Tax Receipt
    • Construction Cost Estimate
    • Bank Account Statement of Payment Made to Seller or Builder
    • Payment Receipt of Payment Made to Seller or Builder
    • Occupancy Certificate
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    Additional Mortgage Loan Documents List for Salaried Individual

    • Form 16
    • Employee Identity Card
    • Employer's Certified Letter
    • Duration of Employment Evidence
      • Appointment Letter
      • Confirmation Letter
      • Promotion Letter
      • Increment Letter
    • 3 Months Salary Slip
    • Increment or Promotion letter
    • 3 Month Bank Account Statement
    • 3 Years IT Returns
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    Additional Mortgage Loan Documents List for Self Employed

    • Proof of Business
      • PAN
      • GST Registration Certificate
      • Trade License
      • Partnership Deed
      • Article of Association
      • Memorandum of Association
      • Import Export Code
      • SEBI Registration Certificate
      • ROC Registration Certificate
    • Financial Statement Audited by CA
      • Profit & Loss Account Statement
      • Balance Sheet
      • 6 Months Bank Account Statement
    • 3 years Income Tax Returns
    • Professional Practice License for Doctors, Consultants, etc
    • Registration Certificate of Establishment for Shops, Factories, and Other Establishments
    • Business Address Proof
Home Loan Interest Rates

Different Types of Home Loan Interest Rates in India

Most lenders offer home loan interest rates of two types. Fixed Rate of Interest, and Floating Rate of Interest.

  • Interest Rate

    The term fixed interest rate defines a type of interest rate that remains constant throughout the entire loan period. Opt for a fixed interest rate for your home loan, when market current or existing interest rates are quite low, and you anticipate an upward trend. Trends change over a period, and opting for a fixed interest rate on your home loan with an option to switch-over to variable rates helps you plan better.

  • Interest Rate

    The term floating interest rate indicates a variable rate of interest, which change in accordance with market dynamics. This kind of rate of interest gives you the advantage to benefits from a declining interest rate market trend. EMIs consequently change in accordance to the increase or decrease in market interest rates. Choosing a floating rate of interest for you home loan in a declining interest rate scenario makes good financial sense.

Basic Home Loan Process in India

Basic Home Loan process goes through the following stages

  • Application

    The home loan application requires you to provide personal information such as your name, address, phone number occupation, monthly and annual income, and education details. In addition, you need to furnish details about the property you wish to purchase, the estimated cost of that property, and the down payment you can afford. Your ID proof, address proof, income certificates, ITR of the last three years, bank statements etc., are also needed with your application form.

  • Documents Verification

    The documents submitted along with your application are then sent in for verification. Your lender may take up to 2 days to complete your process. You may be also asked to appear for a face-to-face interview.

  • Background Check

    Your lender will then check on your credentials, and your background. The investigation may include checking with your previous and current residential addresses, and employers.

  • Processing Fee Payment

    Convinced about your repayment capacity, your lender will then begin with the loan process for which you will have to pay a processing fee of 0.25% to 0.50% of the principal loan amount, and GST applicable as processing fees.

  • Loan Approval

    The documents submitted along with your application are then sent in for verification. Your lender may take up to 2 days to complete your process. You may be also asked to appear for a face-to-face interview.

  • Property Documents Processing

    On receiving your loan sanction letter, you will be required to submit your property's original documents, which will remain in the custody of the lender until you repay the loan in full. The lender may then physically verify the property.

  • Loan Disbursal

    The documents submitted along with your application are then sent in for verification. Your lender may take up to 2 days to complete your process. You may be also asked to appear for a face-to-face interview.