Q What are the types of Home Loans available?
Home loans can be taken for construction of new house / flat, purchase of ready built house/flat, repairs / renovation / extension of existing house / flat.
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Q When can I apply for a Home Loan?
You can apply for a Home Loan even if you have not selected your property. The bank / NBFC will sanction loan amount based on your repayment capacity and the loan will be disbursed when you have actually selected the property.
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Q What loan amount am I eligible for?
You can generally get a loan of minimum Rs.5 lakhs to maximum of Rs.3 Crores, based on your repayment capacity and the cost of property. A higher loan amount can be availed from banks / NBFCs subject to their approvals.
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Q What is a Co-Applicant? Is a co-applicant mandatory for Home Loan?
Co-Applicant is the co-borrower of the loan. The co-applicant must be from your immediate family (viz. Spouse, Father, Mother or Brother). A co-applicant may be required depending on bank / NBFC's policy in order to avail Home Loan.
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Q When can the loan be disbursed?
Your loan can only be disbursed when you have selected the property and submitted all the required legal documents. The property should get legal and technical clearance and you should have paid your contribution to the property purchased. In case of under construction property, the loan will be disbursed according to the stages of construction of the property.
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Q What is the security that I need to furnish to avail Home Loan?
The property should have a clear title, it should be marketable and free from encumbrance. There should not be any existing mortgage, loan or litigation on the property. In case your property qualifies the mentioned criteria, the following documents are required to create a mortgage:
- Title deeds of the property.
- Other property related documents, if any.
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Q How can I repay my loan?
The repayment of loan is done through EMI (Equated Monthly Installments). It can be paid through Post Dated Cheques (PDCs) or Electronic Clearance System (ECS) from any account approved by Reserve Bank of India. In case of part disbursed loans, the monthly interest is payable on the disbursed amount only. This is called the pre- EMI interest and is monthly payable till the final disbursement is done, after which the EMI will commence.
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Q Can I foreclose my loan ahead of schedule?
You can choose to repay the loan even before loan tenure is expired but for this you will be charged with a foreclosure fee depending on the bank / NBFC' s policy.
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Q Can one take a home loan for construction in a city while working in another city?
Yes, one can take a home loan for construction in a city while working in another city.
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Q What is the difference between fixed and floating rates of interest?
A fixed rate of interest generally remains unchanged for the whole tenure of the loan while a floating rate of interest keeps on fluctuating as per market trends.
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Q What are the fees and charges payable and when are they payable?
The applicant may be required to pay nominal fees and charges depending upon the policies of the bank / NBFC he/she has applied. A schedule of payments is made available to the customer about the amount of charges and their due dates.
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Q Does the property have to be insured?
Yes, the insurance of the property against fire, flood, earthquakes and other appropriate hazards is necessary during the tenor of the loan.
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Q How much time do the banks take to disburse the loan?
The disbursement of loan depends on your profile and documentation. It generally takes between 10 to 15 days for the loan to be disbursed once all the documents are submitted.
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Q What are the points I need to consider before finalizing any deal?
To get the final deal from the bank/NBFC, one should keep the following points in mind before signing on the dotted lines:
- Evaluate offers from different banks/NBFCs in terms of EMIs, Interest Rates (Fixed and Floating), Tenure, and other facilities.
- EMI amount should range maximum up to 52% of your net monthly income.
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Q How do banks determine eligibility for a loan and the loan amount?
The bank / NBFC takes into account the following factors to determine the eligibility for a loan and the loan amount:
- Age
- Income
- Co-applicant's income (if applied jointly)
- Financial documents
- Liabilities
- Property valuation
- Number of dependants
- Stability/Continuity of employment/Business.
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Q Can transfer of an already running home loan be possible to other bank / NBFC?
Yes, it is possible. There are various schemes available from different banks / NBFCs for the same.
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Q What are the tax benefits for taking a Home Loan?
You can avail following Tax Benefits on a Home Loan:
- As per Sec 24(b) of the Income Tax Act, 1961 a deduction of up to Rs.1,50,000 is permissible towards the total interest payable on the home loan towards purchase/construction of house property can be claimed while computing the income from house property.
- Additionally, as per the newly introduced Sections 80C read with section 80CCE of the Income Tax Act, 1961 the principal repayment up to Rs.1,00,000 on your home loan will be allowed as a deduction from the gross total income subject to fulfillment of prescribed conditions.
Please refer to the latest IT laws for applicability.
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