What are
the types of home loans available? |
| There are a variety of home loans available. |
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Home Purchase Loan
This is the common loan for purchasing a home. |
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Home Improvement Loan
This loan is given for implementing repair works and
renovations to your home |
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Home Construction Loan
This loan is available for the construction of a new
home. |
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Home Extension Loan
Given for expanding or extending an existing home.
For example, addition of an extra room, etc. |
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Home Conversion Loan
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. |
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Land Purchase Loan
Sanctioned for purchase of land, for both home
construction or investment purposes. |
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Bridge Loan
The Bridge Loan is 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. |
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Balance transfer Loan
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. |
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Refinance Loan
This loan helps you pay off the debt you have
incurred from private sources such as relatives and
friends, for the purchase of your present home. |
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Stamp Duty Loan
This loan is sanctioned to pay the stamp duty amount
that needs to be paid on the purchase of a
property. |
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Loans To NRIs
This loan is tailored for the requirements of NRIs
wishing to build or buy a home in
India |
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What is an
EMI ? |
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.
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How is an
EMI calculated ? |
EMI Formula : l x r [(1+r)n /(1+r)n-1 ] x 1/12
l = loan amount
r = rate of interest
n = term of the loan
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What are
the incentives offered by lending institutions
? |
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Some of the lending institutions sanction the
loan without requiring you to identify property as a
prerequisite for eligibility |
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Free accident insurance |
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Discounts |
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Waiving of pre payment penalty |
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Waiving of processing fee |
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Free property insurance |
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What are
the eligibility conditions for a home loan
? |
| To qualify for a home loan, most of the lending
institutions in India require you to be: |
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An Indian resident or NRI |
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Above 21 years of age at the commencement of the
loan |
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Below 65 when the loan matures |
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Either salaried or self
employed |
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What are
the interest rates offered for home loans? What are: Daily
Reducing, Monthly Reducing and Yearly Reducing
? |
| Interest rates are different from institution to
institution and generally range from about 9.25% to
around 12 %. The interest on home loans in India is
usually calculated either on monthly reducing or yearly
reducing balance. In some cases, daily reducing basis is
also adopted. |
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Annual Reducing |
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In this system, 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. |
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Monthly Reducing |
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In this system, the principal, for which you pay
interest, reduces every month as you pay your EMI. |
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Daily Reducing |
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In this system, 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. |
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What is the
best way to select the cheapest home loan
? |
| Keep the loan period constant and calculate the
total amount paid for the home through the different
loan options available. |
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What is a
fixed rate of interest ? |
| 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. |
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What is a
floating rate ? |
| 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. |
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What are
the other costs that usually accompany a home loan
? |
| Home loans are usually accompanied by the following
extra costs: |
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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. |
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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. |
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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. |
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Miscellaneous Costs
It is quite possible that
some lenders may levy a documentation or consultant
charges. |
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Registration of Mortgage Deed |
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What are
the repayment period options ? |
Repayment period options range generally from 5 to
15 years.
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How do HFCs
decide on the loan amount ? |
| Usually, most companies give up to a maximum of 85% of the cost of the house. The 15%, sometimes called ‘seed money’, will have to be provided by the loan applicant. The amount, for which the applicant is eligible, is determined by the age, income, no. of dependents, monthly outgoing and repayment capacity. This varies from case to case.
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Are
securities required for home loans
? |
| In most cases, the property to be purchased itself 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. |
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Do I
require a guarantor to get a home loan
? |
| Some institutions ask for 1 or 2 guarantors, others
require no guarantor at all. |
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What is the
right time to apply for a home loan
? |
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.
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What is the
time required for loan application approval
? |
About 0-15 days.
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What is the
time required for loan disbursement
? |
| 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.
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Can I make
joint applications for home
loans? |
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.
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What are
the tax benefits of home loans ? |
| Both principal as well as interest of home loans
attract tax benefits. With effect from 1st April 2005
(i.e. assessment year 2005-07) under section 80C of the
Income Tax Act 1965: |
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