Home Loan in India
Home Loan of housing loan is the money borrowed from either a financial institution or an individual for a fixed amount of time. The purpose of the home loan is either to buy a residential property or to repair a residential property. After a certain time period, the borrower would have to return the loan along with the proposed rate of interest of that amount.
This Format of loan has been the primary source of finance for the house seekers all over India. To that end, most major banks and certain businesses all over the nation provide this facility to the Indian populace. Its significance is so great that the term “easy home loans” has become the dominant factor when it comes to an advertisement for the banks.
Buying a hose is essentially the most important decision that an individual has to make in their life. However, the costs they have to bear when it comes to construction and purchase tend to be a bit too much. To that end, home loans provide the necessary financial assistance. They have therefore become an indispensable form of income for most major banks in India.
However, Banks are not the only institutions who provide such a service, for there are individual corporations that are Non-banking Financial Companies that provide the same. However, Availing home loans can be quite harrowing when you consider all the hoops and documents involved. Therefore, registration wall assists in providing you with the best assistance for loans.
Why Home Loan
The answer to the question of “Why take a Home loan?” is pretty self-explanatory. However, buying a house for your own might not be the only reason to avail home loans. There are other reasons that avail such finances; the most common of which entails investment opportunities. Furthermore, with time, the costs of lands and buildings have become quite extravagant. Therefore, a home loan is not merely an option anymore, it is a necessity.
However, if we go into the details of why home loans are so prevalent, you will find out that it has a lot more perks than you can actually observe.
- The residential properties have become expensive: As a general rule of thumb, property transactions tend to be a lot bigger than the regular transactions. Adding to that, the current price value of residents is quite extravagant. However, as a buyer, you do not have to bear the entire cost of the property on your own and therefore, you can get access to the necessary finances from the different party.
- Banks tend to buy houses on your behalf: When you ask for a home loan from a bank, you are not asking for the complete costs. Instead, what you are asking for is for the bank to buy the property on your behalf. The bank finances your costs by the ratio of 80-20. Meaning that the bank will incur 80 percent of the total property cost and you will incur the rest, aka 20 percent of the costs.
- There are tax exemptions associated with home loans: Each financial year, individuals have to bear a lot of taxes. However, with home loans, you can get access to some exemptions when it comes to tax. Under the section 24 of the income tax act, you can avail tax benefit up to 1.5 lakhs from the interest component of the home loan. Furthermore, you can benefit up to 1 lakh for the principal amount.
Types of Home Loans
The types of home loans depend upon the type of property that you are buying and the amount of loan you are asking for. To that end, Banking and Non-Banking Financial Companies provide the following types of housing loans for you:
- Home Purchase Loans: this type of loan is pretty self-explanatory. This form of housing loan is availed to the buyer for the purpose of purchasing a house. Consider one of the most common among the housing finances, all the Major Banks and NBFCs provide this sort of finance.
- Home Loan for construction: While the home purchase loan is meant for buying the house, this variant of housing loan is meant for constructing. However, there is a catch; the land where the house has to be constructed has to be purchased within a year to count the cost of land as part of the loan. Furthermore, the process to acquire finance for construction is also different, for you will have to provide with a lump sum of the cost-estimates that will combine the cost of land with that of construction.
- Plot loans: These are the loans that are availed to buy a plot of land.
- Home extension/revocation Loan: This loan is provided to the lender for the purpose of making changes or for extending the size of an already existing property.
- Home Conversion loan: this loan is availed if the lender has to change the house. Suppose you have bought a house, but now you are changing your residence to a new house; to assist the change, this loan can be provided so that you can transfer the loan to the new house.
- NRI Home loans: If you are an NRI who wishes to purchase the property inside the confines of this nation, then this type of loans is present.
- Stamp Duty Loans: It is the loan on the stamp duty charges that incur while you are purchasing a property.
- Bridged Loans: If the mortgage is an option for you, you can apply for bridges loans. These loans have a time period of 2 years max and within that period of time, the house will be mortgaged.
Eligibility Criteria for Home Loan
You would be happy to know that the eligibility criteria for the home loans are almost consistent throughout the banks. If there is some deviation, it is because of the intrinsic policies of the bank. However, the basic form remains the same.
- Age: The minimum age of the home loan application is 21 years of age. However, you should be able to repay the loan before you are 60 or 65 years old.
- Employment: This criterion entails two subsequent sub-criteria:
- The loan applicant should either be self-employed or a salaried individual.
- The loan applicant should have been in the employment for at least 3 years and should have had the most recent employment for at least 1 year.
- Income: Thos with the annual minimum of 5 – 7 lakhs are the only ones that are eligible for home loans.
- Residence: The applicant should have had a stable residence for at least 1 year. This criterion is to tell the financial institutions about your financial standing.
- Credit Rating: A good credit score is a good eligibility factor. To that end, your credit score is a good way to find out the financial standing of the applicant.
- Parallel Debt Channels: While the institutes are issuing loans to the applicant, they also check the current credit balance of that applicant. They check to see if there are any current Loans in progress and if they do, are they able to pay it properly.
Required Documents for Home Loan
The following are the documents that are required from all the guarantors:
- The duly filled and attested application form along with two passport size photographs.
- ID proof of the applicant. It can be anything from Voter ID, AADHAR Card, Pan card, driving license
- The address proof of the applicant that entails electricity Bill, telephone bill, Passport.
- The bank account statement detailing the transactions of last 6 months
- Business proof of the non-salaried individuals.
- A statement that details personal assets and liabilities
- Identification of signature from current banks the applicant has accounts in
As for the guarantor, the following documents will be required
- ID proof and address proof
- 2 passport sized photographs
- The Proof of business or employment
- A statement that details personal assets and liabilities
- Identification of signature from current banks
- Identification of signature from current banks that the guarantor has accounts in.
If you are a salaried employee, the following documents will be needed from you
- Employee certificate from the employer
- ITR or form 16 of the last 2 years.
If you are a self-employed professional, you will need to provide the following documents:
- A challan that signifies that you have indeed paid your taxes
- The assessment orders or ITRs for the last three years.
Home loan is the financial assistance that a bank or any other financial institution grants for the purpose of buying or renovating a residential property. Home loan is a broad category and the more defined the purpose of the loan is, the deeper the categories develop.
The banks lend home loans to those who can assure repayment after a certain period of time. This factor plays out even in the age limit of when the loan is granted. Therefore, the age limit within which a bang grants loan to a person is 21-65 years of age.
Seeing that the size of home loans tends to be big, the time that bank provides to the financial institutions or banks provide to the lender to repay the home loan is 30 years. However, this is just a universally considered tenure. Therefore, the entire factor of loan tenure depends upon the banks.
An NBFC is an abbreviated term for “Non- Banking-Financial-Institutions”. This term refers to the financial institutions that act and works like a bank, but in actuality is not one.
The interest rates of banks and NBFC are different. The interest rate of NBFC falls under the Prime lending rate, while the interest rates that bank provides falls under Marginal Cost of Funds Based Lending Rate. It means that it is mandatory for the banks to link all loans to MCLR. Therefore, the rates of banks tend to be in accordance with the government rules. However, NBFC is free to set their own rates.
Yes, you can apply for a joint home loan. However, there are some conditions associated with it. The first and foremost condition entails who can be your joint members. Only family members are allowed to be joint members.
If the rate of interest of the homeland varies during the tenure of the loan payment, then that rate of interest is considered a floating home loan rate.
If the loan’s rate of interest doesn’t change during its repayment tenure, the rate is considered to be fixed.
Yes, you can switch your interest rate from floating to fixed. However, the procedure to do so differs for every financial institution. You can get in touch with our connected banks and inquire about the procedure.