Home Loan
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Loan
A house door with your name on it is the ultimate dream of any living individual. In India, owning your own house is considered as one of the major signs of success. As the average income ratio of Indians is increasing with globalization, the desire to buy your own house is also increasing simultaneously. Along with this, the price of property too is increasing day by day, irrespective whether it’s an urban or rural area.
Thus it becomes highly impossible for a common man to buy a house only with his or her savings. This has lead to an increase and extreme popularity in purchasing home loans from Banks and NBFCs to fulfill their dream. Home loans is the best selling banking product. It also assures a stronger and longer relationship with your bank. A home loan that is also known as a housing loan refers to an amount borrowed by a consumer from a bank or NBFC to buy, construct, repair or renovate a residential property. This borrowed amount or loan is lent on a fixed or flexible tenure and an interest rate on the borrowed amount. The borrower is supposed to pay off the principal amount of loan with the interest within the fixed tenure.
Why should you take a home loan?
- Nationwide increase in property rates.
Large-scale financial transactions
- Buying a property involves large-scale financial transactions. At the time of buying a property, a buyer does not necessarily have the entire amount to his/her disposal. Here the home loan covers the financial gap and helps you with a smooth financial transaction that is hassle-free.
Tax benefits
- Under section 24 of the Income Tax Act, home loans are eligible for tax exemptions. You can claim up to Rs. 1.5 lakh out of the interest component of your home loan. Also, if you are staying in the house you got loan for, then you can claim exemption on the principal amount of home loan of up to Rs. 1,50,000.
Don’t spend all savings
- When banks give away home loans, they finance you up to 85%-90% of the original house purchase price. The borrowers are supposed to pay only 10%-15% of the remaining amount. This helps to loosen the financial burden on your shoulders. This way you don’t have to spend all your savings purchasing a house.
Type of Home Loan
Home Purchase loan
- This type of loan is given to the borrower specifically to buy a home. Be it a flat or a bungalow, all banks and NBFCs offer home purchase loans. This is the most popular type of loan and the highest number of consumers opt for this type of loan.
NRI home loan
- People who are living outside India, also known as Non-Resident Indians (NRI) buy property in India for investment or for their family back home. The terms, requirements, interest rates and procedures are different for them as compared to the basic home loan. These are specifically designed for NRI’s.
Home loan to purchase a piece of land
- Consumers, who want to live in a self-built house, need a piece of land or property to do so. People also buy land with an intention of sheer investment. To buy such land in your name costs a fortune. Here you can opt for this type of loan. But this type of loan is not necessarily offered by all banks or NBFCs. You can get this type of loan only if you are purchasing a vacant plot. The term, the interest rate, and procedure for this type of loan are similar to a basic home purchase loans.
Home loan for Renovation / Extention
- Many times consumers wish to further construct or renovate their existing house. Like adding an extra floor or renovating the exteriors and interiors keeping the original structure the same. These loans are becoming popular day by day as people are more interested in renovating an existing house than buying a new one. Also, this type of loan offers similar interest rates as a basic home loan.
DOCUMENTS REQUIRED​
- Neatly signed and filled home loan application form
- Passport-size photographs
- Statements of investments (if any)
- Copy of plan approved for the proposed construction/extension (in case of applying for a home loan for extension)
- Cost estimation or valuation report from the bank’s (or finance company’s) panel CA
- Allotment letter of housing board/NOC of the society/builder etc.
- Bank statements and salary slips of last 6 months from application date
- Identity and signature proof – Passport, Pan card, Driving License, Voter ID card, Aadhar card, employee identity card in case of government employees
- Address Proof – Bank statement, Rent Agreement, Voter ID card, Ration card, Passport, Driving License, telephone/electricity/water/credit card bill or Property tax
- Age Proof – A voter ID card, Secondary school leaving certificate (class 10), birth certificate, Passport, Aadhar Card, pension payment order or Receipt of LIC policy
- Valuation/cost estimation report from evaluator approved by the NBFC or Bank
- Property papers with OC and CC
Fees & Charges Applicable to get a home loan
There are specific fees and charges applied by banks and NBFCs while processing the best home loans. These charges are different from the interest rates. These charges differ in value from lender to lender, but the types of charges are the same everywhere.
Processing fee
- Banks charge a non-refundable processing fee for your home loan request. Different banks charge different amounts as processing fee. This fee is either a specific percentage of the loan amount or a fixed amount of money. Depending upon applicant’s profile and considering some terms and conditions, banks often negotiate and lower the processing charges or waive it off completely.
Legal Fee
- Banks need lawyers to complete the task of verification of property, for which loan will be given. As many banks do not have in-house lawyers, they hire them to complete the task and recover their fees from home loan customers.
Administrative Fee
- Some banks charge administrative fee separately from the processing fee. The administrative fee is applied by banks to compensate for the back-end administrative processes that are performed while processing of home loan applications.
Late payment charges
- If the borrower is late in paying any of the loan installments, almost all the banks impose late payment charges on the borrower. Be it any reason, financial crunch or some other financial liability or plain oversight, banks do not bend their rules.
Tax benefits of a Home Loan
Borrowers can enjoy tax benefits under section 24 of the Income Tax Act. Via this you can claim tax exemptions of up to Rs. 2,00,000 for interest component of your EMI paid during the financial year. According to the Section 80 C of Income Tax Act you can also claim tax benefit of Rs. 1.5 lakh of principal paid during the financial year. If borrower has their spouse as a co-applicant with them in the home loan then both the applicants can enjoy double your tax benefits. The applicant and the co-applicants, both are separately eligible for both interest and principal tax benefits according to the above mentioned acts.
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