- What are the types of home loans available?
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What is an EMI?
- How is an EMI calculated?
- What are the incentives offered by lending institutions?
- What are the eligibility conditions for a home loan?
- What are the interest rates offered for home loans? What are Daily
Reducing, Monthly Reducing and Yearly Reducing?
- What is the best way to select the cheapest home loan?
- What is a fixed rate of interest?
- What is a floating rate?
- What are the other costs that usually accompany a home loan?
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What are the repayment period options?
- How
do HFCs decide on the loan amount?
- Are securities required
for home loans?
- Do I require a guarantor to get a home loan?
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What is the right time to apply for a home loan?
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What is the time required for loan application approval?
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What is the time required for loan disbursement?
- Can I make
joint applications for home loans?
- What are the tax benefits
of home loans?
- Common loan for purchasing a
home.
- Given for implementing repair
works and renovations to your home.
- Available for the construction
of a new home. - Given for expanding or extending an existing home.
For example, addition of an extra room, etc.
- Available for those who have
financed the present home with a Home Loan and wish to purchase and move to another
home for which some additional funds are required. Through a Home Conversion Loan,
the existing loan is transferred to the new home, including the additional amount
required, eliminating the need for pre-payment of the previous loan.
- Sanctioned for purchase of land,
for home construction or investment purposes.
- Designed for people who wish to sell the existing home and purchase another. The
bridge loan helps finance the new home, until a buyer is found for the old home.
- Balance Transfer loans help you pay off an existing
home loan with a higher interest rate, and avail of a loan with a lower rate of
interest. - This loan helps you pay off the debt you have incurred
from sources such as relatives and friends, for the purchase of your present home.
- This loan is sanctioned to pay the stamp duty amount
that needs to be paid on the purchase of a property. - This loan is tailored for the requirements of NRIs wishing
to build or buy a home in India.
EMI (Equated Monthly Installment) is the amount payable to the lending institution
every month, till the loan is paid back in full. It consists of a portion of the
interest as well as the principal.
= loan amount
= rate of interest
= term of the loan
- Free accident insurance
- Discounts
- Waiving of pre payment penalty
- Waiving of processing fee
-
Free property insurance
Most of the lending institutions in India require you to be:
- An Indian resident or NRI.
- Above 21 years of age at the commencement of the loan.
- Below 65 when the
loan matures .
- Either salaried or self employed.
- Free property insurance.
Interest rates differ from institution to institution and generally range from about
9.25% - 12 %. The interest on home loans in India is usually calculated either on
monthly reducing or yearly reducing balance.
The principal, for which you pay
interest, reduces at the end of the year. Thus you continue to pay interest on a
certain portion of the principal which you have actually paid back to the lender.
This means the EMI for the monthly reducing system is effectively less than the
annual reducing system.
The principal, for which you pay
interest, reduces every month as you pay your EMI.
The principal, for which you pay
interest, reduces from the day you pay your EMI. EMI in the daily reducing system
is less than the monthly reducing system.
Keep the loan period constant and calculate the total amount paid for the home through
the different loan options available.
Some institutions have a fixed rate of interest, which means the rate of interest
remains unchanged for the entire duration of the loan. This means you do not benefit,
even if rates of interest drop in the market.
This is the rate of interest that fluctuates according to the market lending rate.
This means you stand the risk of paying more than you budgeted for in case the lending
rate goes up.
- Processing Charge: It’s a fee payable to the lender on applying for a loan. It is
either a fixed amount not linked to the loan or may also be a percentage of the
loan amount. The loan amount required by you cannot be less than the processing
fee.
- Pre-payment Penalties: When a loan is paid back before the end of the agreed duration,
a penalty is charged by some banks/companies, which is usually between 1% and 2%
of the amount being pre-paid.
- Commitment Fees: Some institutions 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 is quite possible that some lenders may levy documentation
or consultant charges.
- Registration of mortgage deed.
Repayment period options range generally from 5 to 15 years.
Most companies give up to a maximum of 85% of the cost of the house. The 15% is
provided by the loan applicant. The amount for which the applicant is eligible,
is determined by the age, income, number of dependents, monthly outgoing and repayment
capacity. This varies from case to case.
In most cases, the property to be purchased becomes the security and is mortgaged
to the lending institution till the entire loan is repaid. Some institutions may
ask for additional security such as life insurance policies, FD receipts and share
or savings certificates.
Some institutions ask for 1 or 2 guarantors, others require no guarantor at all.
Loans may be applied for before or after selection of property. The loan amounts
are sanctioned in principle to let buyers know what amounts they can avail of. This
helps them decide their budgets and purchasing power. Actual disbursements are made
after satisfactory verification of all necessary documents and completion of specific
procedures.
About 0-15 days.
On an average, loans are disbursed within 3-15 days after satisfactory and complete
documentation and completion of all relevant procedures, including proof that 15%
of the cost has been paid upfront to the seller of the property.
Most institutions are willing to consider the joint incomes of the applicants for
deciding the loan amount. Some institutions do not require the co-applicants to
be co-owners of the property to be purchased.
Both principal as well as interest of home loans attract tax benefits.
Principal amount of repayment of loan along with other savings such as PF, PPF,
Life Insurance premium etc up to a maximum of Rs 1,00,000/- will be eligible for
deduction from gross income.
Interest paid on loan after completion of construction will be deductible from income
from property.
For self occupied – Income will be treated as nil and interest payment will be treated
as minus income which will be adjusted against other income.
For rental property – It will be adjusted against rental income.
Interest paid on loan before completion of construction will be allowed as deduction
from income at 20% per year for the next five years.
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