Home Loan is a product that enables you for buying your own home, which is the one of the most important dream for any person. Home loan makes it easier to carry our large value transaction involved into buying a home into easier job. All you need is to contribute a small sum of amount as margin to lender and rest may be taken care by lender itself. Lenders like Banks, NBFCs or Housing Finance companies mortgage the property and provide a loan amount sufficient to buy your chosen property, that eventually becomes your dream home.
Compare Home Loan Interest Rates
Here is a comprehensive list of Home loan interest rates in India from various lenders like Banks, NBFCs and Housing Finance Companies. It is important to note that this is just the tentative list and rates may vary, So before finanlizing the lender it is better to seek clarity from the lender of your choice. The interest rates for home loan may also vary basis the profile of borrower or the property details.
How Does Home Loan works
The steps involved in Procuring the home loan are closely linked to your purchase of property. It is a simultaneous process where the transaction of property and disbursal of home loan happens at the same instance. It starts with your choosing the property. When you select the property of purchase, the value of agreement and related registration costs are considered for loan amount. When you apply for home loan, the lender does a deep check on your profile, credit history and earning details. This is done to ascertain your capacity to payback the loan amount through monthly EMI. Lender also does a legal check on the property to ascertain the clear title thus to enable mortgage.
When you and the selected property qualifies on the lender parameters of selection of loan, they sanction a loan for certain amount. The borrower has to pay minimum 20% towards margin of the property value. Remaining amount of upto 80% is paid by the bank or lender at the time of registration of property. All the original documents, including the registered sale agreement is kept by the bank till your repay the entire loan amount.
What is Home Loan EMI
Once you take a loan, you need to pay it back. It is always easier to pay it systematically through a long period by paying a small amount every month. So bank ascertain a amount basis the amount of loan, rate of interest and tenure of loan. This amount is termed as Equated Monthly Installment or EMI and is required to be paid by borrower every month for the entire tenure of loan.
Rate of interest for Home Loan
It is the rate of interest applicable on the outstanding loan amount. These rates are usually 2-4% higher than fixed deposit rates of the bank. The Home Loan interest rate are compounded on Daily, Monthly or quarterly basis depending on terms of lending agreement.
Tenure of Home Loan
It is the period of Loan within which the amount of loan needs to be refunded. Normally EMI are made to the entire tenure that may vary from 5 to 25 years of Loan. Generally tenure of the loan are kept so as not to exceed the working years of the person.
Tax benefits of Home Loan
Home Loan offer a huge advantage in terms of tax benefits. Bothe principal and interest towards a home loan amount are exempt from taxable income as per IT Act, 1961. As of now, the principal amount paid in a year to the extent of Rs.1,50,000.00 (Rs. One lac Fifty thousand) is exempt from taxable income u/s 80C. The interest amount paid of Rs.200,000 (Rs. Two lacs) in a year is exempt from taxable income. So, in all, the cumulative EMI amount paid to the extent 3.5 lacs in a year is exempt from taxable income.
Different Types of Home Loan
A common belief is that home is available only for purchase of new house or flat. However, home loan can be availed for purchase of Land or plot, Construction of house over the piece of land, improvement of existing house for major revamp or redevelopment. Also in case, where someone wish to build an additional floor or even a single room, a home loan can help.
Who are eligible for Home Loan
Eligibility by Age for Home loan : One should be above 21 years of age for applying a home loan. Though most banks doesn’t lay such criteria in written, however loans are disbursed with the working years of an individual. As one may face issues while availing home loan after the age of 60 years.
Eligibility by Profession for Home Loan :Any individual who is either salaried, professional or self employed is eligible for home loan.
Income Criteria for Home Loan: The individual looking to have a home loan should have a regular stream of earning to suffice the EMI repayment. For self employed individuals, the net earnings or the profits earned out of their business or profession may determine their loan amount eligibility.
Other Eligibility criteria
Though the above said criteria are the primary ones however there are other as well.
Employment stability: The profile of your employer determine your income stability so that become an important criteria. People drawing salaries from reputed companies are preferred more than ones drawing salary from their own business.
Credit History : This is make or break one, so if you have any track record of missed EMI of previous loan or a complete settlement with lender, then it is less likely for you to get a loan. A clean track record or a good credit score increases your bargaining power.
Documents required for Home Loan
- Duly Completed and signed loan application form with all relevant details.
- ID proof
- Address Proof (Current as well as permanent)
- Income proof (Income tax return or Salary slip)
- Details pertaining to existing loan, if any
- Proof of investment, if any
- Bank statement for past 6 months
- Property related documents – Initially the copy of all document along with details of previous chain of ownership
- Originals at the time of disbursal of loan.
- Cost estimation sheet
- Plan of construction and payment