Home loan is an easy way to buy your own much-awaited DREAM HOME.
Availing Finance from Financial Institutions to own residential property is called Home Loan. These Home loans can vary from INR 5 lac to INR 50 cr. It can be for a short term period of 2-3 years to 30 years – depending upon the specific requirements of the Customers.
Home Loan facility is sanctioned in accordance with White Value or Agreement value or Circle Rate of Property, i.e. on the price on which stamp duty is paid and the registry is done. Another major factor that decides the Loan amount is the current Market Value of the property.
Usually, Banks are comfortable extending up to 75% – 80% of the Cost of White value/Agreement Value of the property But Subject to Maximum 75% or 80% of Market Value of property( Whichever is Lower).
Who can avail this loan?
Home Loan Eligibility calculation is complex process with different banks having different criteria and parameters. But broadly following parameters decide on Home loan Eligibility
- Monthly income of the Customer
- Monthly obligation of the Customer
- Category of Customer – Salaried, Self-Employed or Professional
- Profile of Customer – Higher Risk profile constitutes Low eligibility
- White Value or Agreement Value or Registry Value of property
- Market Value of property
- Tenure of loan
- Interest rates of Loan
A home loan can be availed for buying a New House, Home Renovation, Home Construction, Buy a Plot or Balance transfer of existing Home Loan.
Yes. All the co – owners of your property will have to sign up as co-applicants. For a sole property owner or applicant also, most banks require one adult member in the family to sign up as a co-applicant. In case of partnership firm or a company, partners and promoter directors respectively need to be co-applicants.
- Salaried Individuals,
- Self Employed Professionals i.e Chartered Accountants, Doctors, Architects, Cost Accountants, Company Secretary, Management Consultants etc.
- Self Employed Non Professional i.e Traders, Distributors, Manufacturers, Service Providers etc.
- Non-Individual Entities i.e. Proprietorship Firms, Partnership Firms, Private Limited Companies, Public Limited companies.
Your bank will assess your repayment capacity while deciding the home loan eligibility. Repayment capacity is based on your monthly disposable income, which basically means how much of your monthly income you can spend for repaying the loan after deducting monthly expenses and obligations. The higher the monthly disposable income, higher will be the amount you will be eligible for loan.
Where you have availed only a part of the loan, you would be required to pay only the interest on the amount disbursed till the full loan is availed. This interest is called pre-EMI interest (PEMI) and is payable monthly till the final disbursement is made, after which the EMIs would commence.
Higher loan Tenure means lower EMI, as the loan repayment is amortized over the loan tenure. Most banks offer home loans for a maximum term of 15 or 20 years depending on the age of the applicants.
Based on the documentary proof pertaining to your income, obligations and credit rating, the bank decides whether or not the loan can be sanctioned to you. The bank will give you a sanction letter stating the loan amount, tenure and the interest rate, among other terms of the loan.
When the loan amount is actually handed over to you, it is called disbursement of the loan. This happens once the bank receives the required property papers. It conducts a legal and technical evaluation of the property. If everything is found in order the loan is disbursed. The disbursement of a home loan will happen directly to the person you are buying the property from in cases of fresh purchase. For Balance transfer cases, the loan will be disbursed to the financer from where it is being transferred.
Loan to Value (LTV) is a term that is used to express the ratio of a “Loan to the value of the Property Mortgaged”.
This is a table that gives details of the periodic principal and interest payments on a loan and the amount outstanding at any point of time. It also shows the gradual decrease of the loan balance until it reaches zero.
Yes. Resident Indians are eligible for certain tax benefits on both Principal and Interest components of a Home Loan under the Income Tax Act, 1961. Under the current laws, you are entitled to an income tax rebate for Interest repayment up to Rs. 200,000 /- per annum and Principal Repayment of INR 150,000/- under section 80C.
If the Housing Loan is availed by two or more persons, each of them is eligible to claim a deduction on the interest paid up to INR 2 lakh each. Tax can be deducted on the principal paid as well for an amount up to to INR 1.5 lakh each. However, all the applicants should also be co-owners of the property in order to claim this deduction.