Home Loan FAQs
1. When can I apply for a Home Loan?
2. How do I make an application?
3. How is my Home Loan eligibility determined?
4. How long does it take to get my application processed and the loan sanctioned ?
5 . What is the maximum amount I can borrow?
6. What security/collateral do I have to provide?
7. Does the property have to be insured?
8. Can I take a Home Loan for construction in one city while working in another city?
9. What is the range of interest rates offered?
10. How is the interest rates calculated on my loan?
11. What are the bases of interest rates calculation?
12. What is the Fixed Rate of Interest?
13. And Floating Rate of Interest?
14. What are the repayment period options?
15. Can I repay my loan ahead of schedule?
16. Who can be a Co-Applicant?
17. What are the fees and charges payable and when are they payable?
19. In how many installments can the loan be disbursed?
20. What do you mean by CIBIL?
21. Do I get a tax benefit on Home Loan?
22. Does the agreement for sale have to be registered?
22. What are the documents required at the time of application?
When can I apply for a Home Loan?
You can for apply for Home Loan at any time. You may apply for it after you have decided to acquire/construct a property, and even in case, the property has not been selected or the construction has not commenced, you can still apply. What's more, you can also avail for Home Loan facility if you want to renovate or expand your home.
How is my Home Loan eligibility determined?
Your Home Loan eligibility is determined by ayour repayment capacity, taking into consideration, factors such as: Your:
- • Income
- • Qualifications
- • Age
- • Spouse's income
- • No. of dependants
- • Stability and continuity of occupation
- • Assets/Liabilities.
- • Savings history.
- The most important concern of banks in determining your loan eligibility is that whether or not you are contentedly able to pay off the amount you borrow.
How is my Home Loan eligibility determined?
Banks usually take some additional securities which are called collateral securities. Collateral could be in the form of guarantee from one or two persons, assignment of life insurance policies, the surrender value of which should be equal to the loan amount, deposit of shares, and units or other securities. These additional securities are taken just incase a loan is not paid back; recourse may be taken to such securities instead of depending upon the mortgage of the property which is the last resort .
How long does it take to get my application processed and the loan sanctioned?
It takes around two weeks for processing of one's application if all the necessary documents are in order and takes another week for the bank to inspect the property papers and make the disbursement.
What is the maximum amount I can borrow?
The maximum amount that you can borrow depends on factors such as:
- • The purpose of the loan.
- • Whether it is for purchase of property or improvement or renovation.
- • Or purchase of land for development etc.
The maximum amount that you can borrow depends on factors such as:
What security/collateral do I have to provide?
Banks usually take some additional securities which are called collateral securities. Collateral could be in the form of guarantee from one or two persons, assignment of life insurance policies, the surrender value of which should be equal to the loan amount, deposit of shares, and units or other securities. These additional securities are taken just incase a loan is not paid back; recourse may be taken to such securities instead of depending upon the mortgage of the property which is the last resort .
Does the property have to be insured?
Yes, and you will have to insure that the property for fire and other appropriate hazards, as required by the banks during the loan tenure. The banks will be the beneficiary of the insurance policy . You will also have to produce proof/evidence, whenever required by the banks. This is an added cost that will add to the final cost of purchase of the property.
Can I take a Home Loan for construction in one city while working in another city?
Yes, you can take loan for construction in one city while working in another. The banks usually service this loan after getting details of the plot legally verified.
What is the range of interest rates offered?
The home loan interest rate varies from banks to banks and normally ranges from 9 to 12%.
How is the interest rates calculated on my loan?
Most banks follow the monthly reducing-balance method, which accounts for your principal repayments only at the end of the particular month. Some banks may also follow the daily reducingbalance method.
What are the bases of interest rates calculation?
The interest on Home Loans is usually calculated on Reducing balance. In Monthly Reducing Balance, the principal on which you pay interest reduces every month as you pay your EMI and in daily Reducing Balance, the principal is reduced at the end of the each day
What is the Fixed Rate of Interest?
Fixed Rate of Interest means that the interest rates remain FIXED for the entire duration the loan. This basically means that you do not benefit, even if the rates of interest drop in the market.
And Floating Rate of Interest?
This is the rate of interest that fluctuates according to the market lending rate.
What are the repayment period options?
The maximum period over which one can pay the loan varies for every bank, and is also different for every scheme. Also your residential status makes a difference. If you are a resident Indian, you could avail of a loan for duration of 1-25 years.. As a Non-Resident Indian, you can only avail of a loan for a maximum period of 15 years.
Can I repay my loan ahead of schedule?
Yes, you can pay your loan ahead of schedule, if you want to. However, it must be noted that banks charge a fee for early redemption of loan. This fee can vary between 1-2% of the loan amount being pre-paid.
Who can be a Co-Applicant?
A Co-Applicant(s) is/are the Co-Owners of the property in respect of whom the financial assistance has been sought. However all co-applicants need not be co-owners. Usually co-applicants are: husband/wife, father/son, mother/daughter etc.
What are the fees and charges payable and when are they payable?
Banks charge fees at the time of application which is called processing fee and it is generally charged as a percentage of the loan amount
What is a Pre EMI & EMI?
Pre EMI is nothing but interest alone you pay to the bank for whatever amount the Bank releases in your loan. Pre EMI is paid on all amount released by the Banks in stages before the final disbursement.
EMI or Equated Monthly Installments refers to the fixed sum of money that you will be paying to the bank every month. The EMI comprise of both interest and principal repayment. The amount of the EMI depends on the quantum of loan, interest rate applicable and the term of the loan. EMI will automaticaaly start once the bank disburses the entire loan amount.
In how many installments can the loan be disbursed?
The loan can be disbursed in full or in suitable installments taking into account the requirement of funds and progress of construction, as assessed by the bank.
What do you mean by CIBIL?
CIBIL is an institutionwhich contains the credit history of commercial and consumer borrowers and shares the information to its Members in the form of credit information reports.
For more information click http://www.cibil.com/faqs.htm
Do I get a tax benefit on Home Loan?
Yes, you are eligible for tax benefits on the principal and interest components of the loan under the Income Tax Act, 1961. However as the benefits could vary each year, do check out the current benefits available.
Does the agreement for sale have to be registered?
There is no general static rule that the agreement has to be registered mandatorily. It varies from state to state.
What are the documents required at the time of application?
Each bank has its own list of documents that one must submit at the time of application. The common documents that the banks require at the pre-approval stage are:
- • your business track record.
- • Copy of audited financial statements for the last 2 years.
If you are salaried, you need:
- • Salary and TDS certificate
- • Latest pay slip
- • Letter from employer.
And at the disbursal stage (for property already located), you need to submit the following:
- • Allotment letters.
- • Photocopies of title deeds.
- • Encumbrance certificate.
- • Agreement to sell .
