What Is a Home Loan?
Everyone dreams of having their own place in the world, a home they can come back to from work, a home in which they can start their own family, but for many ‘a home’ remains a dream because of a lack of capital. Here is where banks and other financial institutions come to the rescue with home loans, which would help realize your dreams.
Your housing needs are not the same as the person next to you, the home loan could be for a brand-new apartment, or to renovate your ancestral property or even build that extra room that you have been wanting for long. Read on to know more about the different loans that would meet your requirement.
- When do I make my home loan application?There is no particular right time for making your home loan application. As soon as you have figured out your budget and zeroed down on the property that you want to buy, you should apply for home finance.
- Is visiting the lending bank compulsory to avail home finance?Yes, mostly. Although a lot of loan processing work has been shifted to online platforms, still a loan applicant is required to visit the lending bank branch at least once to formally close the loan processing formalities. Many private banks have started sending their representatives to borrowers’ place to get documents and forms signed and verified.
- Will the lending bank provide the entire cost of the property that I wish to buy?No. Generally, banks only lend 80% of the cost of your property. The rest 20% is to be borne by the loan borrower. However, to ease out the process for customers, most banks have broken up this ration into 10-80-10 so that at the time of availing the loan, customers are only required to pay 10% of the total cost and the rest is paid by the bank.
- When does the repayment period start?Repayment of loan starts after the entire home loan is disbursed to the borrower. In case of under-construction properties banks allow payment of the partially disbursed amount. Towards this partially disbursed loan amount, customers are free to either repay the principal and interest amount both or just the interest amount or none at all.
- Can loan repayment be made ahead of schedule?Yes. All banks allow pre-payment of home loans. Some banks charge a pre-payment fee for that while others do not.
- Do I have the right to choose between base rate and MCLR for my home loan request?Current home loan borrowers who have a running home loan account can choose to continue with base rate or switch to MCLR. New home loan borrowers need to avail the new MCLR rates which are subject to change every set interval of time as mandated by the RBI.
- How long does it take for home loan to get sanctioned?Your home loan will get sanctioned as soon as all the required documents are submitted and verified successfully. This may take anywhere between 10 to 30 days.
- Do I get to avail tax benefits on home loan?Yes. Home loans are a great instrument to avail tax benefit. This is offered to both the interest and principal components of home finance. Under section 24(1) interest repayment of Rs.2,00,000 is eligible for exemption and on the same housing loan a principal amount of Rs.1,50,000 is eligible for exemption from tax.
- Is taking a home loan a smart investment move?Any kind of property is considered an asset and hence buying a property is considered as a wise decision. Also, real estate prices have been appreciating on an annual basis. If you are confident that your income is sufficient to cover you for a long term liability like home loan then you can surely avail one to buy a property.
- What is meant by EMI?EMI stands for Equated Monthly Installments. An EMI is made up of two components, principal and interest. Any loan availed by a borrower is repaid in EMIs over the loan tenure.
- What collateral do I need to furnish as security?Since home loan is a huge loan amount and the tenure also is long, hence, almost all banks ask borrowers to furnish some collateral as security against the loan. This include the papers of property for which loan is being sought, some other property papers, any fixed deposit schemes or insurance schemes etc. that are on the loan borrower’s name.
- Can I apply jointly for a home loan with my spouse? Will both our incomes be considered for loan quantum?Yes. You can apply jointly in your and your spouse’s name. Both of your incomes will be considered for determination of loan quantum.
- What documents do I need to submit to avail home loan in India?Generally, all banks ask for proof of address, proof of identity, bank account statements and salary details from home loan borrowers. This list may differ a bit from one bank to another.
- How can I make EMI payments against my home loan?Home loan EMI payments can be made to the bank either by using offline channels like cheque, demand draft and cash or by availing the net banking facility that all banks offer to their home loan customers. Post dated cheques and Standing Instructions are another popular way to make EMI payments.
- If I deposit my property documents as security with the bank, when will I get those back?Any property document that you submit as security collateral is returned to you only once the entire home loan amount is repaid and the home loan on your name is closed.
- Can I avail home finance for renovation or construction of house?Yes. Home loans are offered under various sub-heads. Housing finance for renovation of property or construction of house is also offered by all major banks in the country.
- Can I switch from fixed to floating rate of interest and vice versa during the tenure of my home loan?Yes. Most banks allow switching between fixed and floating rates. However, customers may be charged a particular fee for the same.