A Home Loan is a secured loan product where the lender provides finances for the purchase or construction of a residential/commercial property. One can also avail a housing loan to buy a plot of land and construct on it. Home Loans are also issued to extend/ repair/ renovate/ alter a new or second-hand property. The Home Loan is taken by a borrower against the property/security to be bought. This is done by giving the banker a conditional ownership over the property i.e. if the borrower fails to pay back the loan, the banker can retrieve the lent money by selling the property.
Most lenders get the property valued independently and provide loans based on their estimated value. It is important to remember, however, that frequently their valuation is significantly lower than the actual cost and hence the requirement of the borrowers goes up. Home loans in Indian Banks are provided up to maximum of 80% (90% for loan amount below INR 20 lakhs) of the value of the house. Home loans are repaid using Equated Monthly Instalments (EMIs) spread over a fixed tenure.
Home Loan Eligibility Criteria
Home Loan eligibility depends upon various factors. A few of them are listed here –
- Income – Your income determines the amount of home loan you are eligible for. Banks generally keep the EMI to income ratio at 0.45 to 0.50.
- Tenure – The longer tenure you opt for, the more is your home loan eligibility and the lesser is your EMI.
- Age – Your age will determine your home loan tenure and hence your eligibility.
- Interest Rate offered – Banks offer Fixed and Floating Rates of Interest. If your interest rates are on a lower side, then the loan eligibility will be higher.
- CIBIL Score – Your credit report tells the bank about your repayment capacity and hence determines if you’re eligible for a loan.
- Identity Proof
- Address Proof
- Bank Statement (Latest 12 months)
- 6 Months Salary Slip
- Form 16 (Last 3 Years)
- Complete Property Papers
Home Loan Application Fees and Charges
Home Loan Lenders levy some fees and charges at the time of loan sanctioning. It is important to make yourself aware of all these charges before you decide you finalize the deal.
- Processing Fee: This fee is charged by the bank for processing the home loan and is non-refundable. In case you decide not to take the loan from the bank, then the entire amount is forfeited. The amount generally varies in the range of 0.5 to 1% of the total home loan amount. Payment of processing fees doesn’t mean that your loan is approved. You may have paid the processing fee but your loan could still not be sanctioned due to various other reasons. Therefore, before paying the processing fee, bargain on the amount and get it confirmed from the bank in writing.
- Prepayment Fees: Prepayment fee comes in to play when one wants to prepay the home loan before the end of the tenure. Different banks have different charges so one should take the time out to know them. Few banks offer no prepayment charges in case the prepayment is done from the borrower’s own sources. But in case the person is shifting the loan to a different lender, most of the banks charge a fee in the range of 1% to 2% of the outstanding loan amount.
Also, according to the RBI norms, banks are not allowed to levy foreclosure charges on home loans anymore.
Home Loan Balance Transfer
One of our most popular products among Home owners, a Balance Transfer can help you get a better deal on your Home Loan thus enabling savings. You can also use a balance transfer to take a top up loan from a bank, which allows you to pay off your other loans by taking a consolidated loan from a bank.