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Who can apply for a home loan?

Any Indian Resident, Non-resident Indian or Person of Indian Origin can apply for a home loan if they are 21 years of age at the origin of the loan and 65 years or below at loan maturity. Housing Finance Companies (Lenders) usually give home loans for properties located in India to people who are employed or self-employed, with a regular source of income.

When can a home loan be applied for?

An individual can apply for a home loan even before the property has been selected. The loan amount is sanctioned based on the ability to repay. This helps in planning a budget while purchasing the house.

How does the lender calculate eligibility?

Loan eligibility is calculated based on the ability to repay. Factors such as income, age, qualifications, number of dependants, spouse’s income, assets, liabilities, stability and continuity of occupation and savings history are taken into consideration.

How do I repay the loan?

You can repay the loan in Equated Monthly Instalments (EMIs) comprising principal and interest. Repayment by EMIs commences from the month following the month in which you take full disbursement. Till then, you only need to pay the interest on the amount disbursed.

What is pre-EMI interest?

Before final disbursement, you may have to pay Simple Interest on the portion of the loan disbursed. This is called pre-EMI interest. Pre-EMI interest is payable every month from the date of each disbursement up to the date of EMI commencement.

What is the rate of interest for the duration of the loan?

Rate of interest generally vary from bank to bank & on profiles. Most lenders offer fixed rate as well as the variable rate options to customers. Contact us to know the current rate of interest.

What is a fixed rate loan?

A rate of interest that is constant throughout the duration of the loan is known as a fixed rate loan.

What is a floating rate loan?

A floating rate is when the interest rate on the loan changes according to the rates in the market during the period of the loan.

It is better to opt for a fixed or a floating interest rate?

If interest rates are falling, a floating rate loan is a better option. But when interest rates are rising, opt for a fixed rate loan, because you will then know in advance what your EMIs will be.

What are the other areas of expenditure involved in procuring a home loan?

Processing and administrative fees, pre-payment charges and delayed payment charges, legal fees, technical fees, stamp duty and registration of mortgage deed are all likely areas of expenditure.

How do I select my lender?

Analyse the following points before taking your decision:

  • Loan amount: The minimum and maximum loan amounts vary between Lenders. Find out if the amount you require falls within this limit.
  • Duration: There is no lower and upper limit to the tenure of the loan. Find out if the time limit you want it for can be accommodated. This varies between Lenders. Normally Lenders offer loans ranging from 5-20 years, with some going up to 30 years. For NRIs the maximum tenure could be 10 years in some cases. Depending on your requirements, this would have a bearing on the loan you opt for.
  • Interest rate: This varies between Lenders. Fix a duration that you want the loan for and find out the EMI from them. Compare and identify the lowest EMI.
  • Pre-payment: Check if the lender charges for repaying the loan before its due date.
  • Flexibility: Find out whether you can change your interest scheme from fixed to variable if so desired or if there are restrictions.
  • Guarantor: Some Lenders require this, while others don’t.
  • Documents required: These may vary between Lenders although there are a few standard documents like proof of income, proof of age and residence and a salary slip.
  • Co-owner: If there is to be a co-owner or co-applicant for the loan, the lender has to accept the relationship between the two.
  • Other fees: Each lender has different fees for administration and processing among others.

What is the maximum amount of housing loan available?

The maximum amount is 80% of the cost of the property, including the cost of land, subject to a maximum amount of Rs 3 crore.

What is the amount I can borrow and what are the criteria?

Generally, the amount is up to 2.5 times your gross annual income. But your equated monthly instalments usually should not exceed 35% to 50% per cent of your gross monthly income. Besides this, lenders will assess your eligibility based on your ability to repay.

What is the period in which I will have to repay the loan?

Usually in a period of between 5 to 15 years, but definitely before you retire. A few Lenders also offer a 20-year repayment period, usually at a higher interest rate.

How do I apply for a loan?

Send us a mail to know more on this as we work with India’s leading lenders/financers and hence can get you the best industry rates coupled with class leading service.

Is a guarantor required?

A guarantor is insisted on by the lender so as to ensure that the loan is paid back in full and in time. The guarantor is responsible for the repayment of the loan if the borrower is unable to do so.

Can I repay the loan before the set date of repayment?

You could do this, but lenders will charge a pre-payment fine for this.

What security do I have to provide?

By default, the first mortgage of the property to be financed is given to the lending/financing firm. Hence no other security is required.

Does the Agreement for Sale have to be registered?

Yes. In many Indian states, the agreement between the builder and purchaser has to be registered. This can be done at the office of the sub-registrar appointed by the State government. We can help you with this incase you need our assistance.

How long does it take to get my application processed and my loan sanctioned?

It will take around 15 days for the processing of your application if your documents are in order. Make an application only if you are eligible for the loan since the lender will not return the application-processing fee. It will take another week for the company to check out your property papers and make the disbursement. Incase the property is Pre-Approved by the lender (almost 90% of the properties that we recommend are pre-approved in advance by all leading lenders), the disbursement can happen 3 days after issue of sanction letter.

When do I have to make my share of the contribution to the purchase price of the property?

You will have to make your payments towards the property price up-front before the lender disburses any instalment of the loan. However in exceptional cases, parallel funding is possible.

In how many instalments can the loan be disbursed?

The loan can be either disbursed in full for outright-purchase / ready properties or in a few instalments for under construction properties. The disbursement will be made taking into account the requirement of funds and the progress of construction.

Do I get tax benefits on the loan?

Yes. You are eligible for certain exemptions on both the principal and interest components of the loan as per the Income Tax Act, 1961. Please check with your CA/Financial planner for the latest tax rules on this regard.

Can I sell the property on which I have taken the loan?

Yes. But the loan will have to be repaid before the sale is effected. Some Lenders allow the transfer of loan to the buyer of the property, depending on his eligibility for loan.

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:

A resident Indian or NRI

Above 21 years of age at the commencement of the loan

Age to be less than 58 on loan termination for salaried class of cutomers or below 65 of age on loan termination

Either salaried or self employed.

What are the other costs that usually accompany a home loan?

Home loans are usually accompanied by the following extra costs:

  • Processing Charge: It’s a fee payable to the Bank/FIs 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.
  • Pre-payment Charges: When a loan is paid back before the end of the agreed duration, a fee is levied by some banks/companies, which is usually between 1% and 2% of the outstanding loan amount.
  • 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 a documentation, Legal charges, Technical charges etc in the absence of Processing fees.
  • Registered mortgage deed or Creation of Memorandum of Understanding/Entry. Stamp duty payable on this will have to be paid by customer.

What is the time required for loan disbursement?

On an average, loans are disbursed within 7-15 days after satisfactory and complete documentation and completion of all relevant procedures, including proof that 20% of the cost has been paid upfront to the seller of the property.

Can I make joint applications for home loans?

Normally only the close relatives like spouse, parents, brothers are allowed as co-applicants. All co-owners of property will have to be co-applicants.

Can a loan be switched over if I have obtained it at a high rate of interest, but another lender is offering a better interest rate?

You could do this. After discussing the reasons with the current lender, they may even reconsider the interest rate.

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