All about Home Loan
With the boom in the real estate market in India, Home or Housing Loans have become one of the most common types of loans. It is a loan that benefits the middle-class people in their quest to meet their dream of owning a house. But, one needs to go through the details of this loan before applying for any of the numerous schemes available.
1. What exactly is a ‘home loan’?
Housing Loan or Home Loan is a financial support offered by banks and NBFCs to fulfill your residential needs. In this process, the home purchased stands as a “collateral” until you repay the loan amount borrowed with interest.
2. Basic requirements to avail a home loan
Banks and other financial companies, who offer home loans, have various rules concerning this factor. These factors vary from institutions to institutions however the Basic Requirements are as follows:
- The applicant should have a fixed and dependable source of income.
- An acceptable financial record of extending to at least six months of active banking.
- Be of 21-60 years of age if employed or 21-65 years, if self-employed
The first and foremost step of this process is to decide on the budget. This loan offers 85 % of the required amount which is the overall cost of the property. You have to pay around 15 per cent separately along with Other Charges, like registration charges, stamp duty charges etc.
3. Are you eligible for a home loan?
It is the crucial step of this process and decides the loan amount that will be offered to you. The Eligibility is measured on the basis of your income and other liabilities. Moreover, if you can provide a co-applicant, then it will Increase your Eligibility for the higher loan amount.
4. Calculating Interest Rates and other Fees
Rate of interest is the additional fees that banks and financial institutions charge to grant a loan. The rate of interest vary from bank to bank. To get the best deal, you need to consult various banks and firms and compare the various deals. Also, beware your banking terms like fixed and floating interest rates.
Consider various factors before deciding the option that suits your budget. There are many Other Charges like processing fee, a commitment fee and other charges.
5. What are the documents required?
The Documents, which you need to submit, are Id proof, Address proof, bank statements, ITR and few documents related to property.
6. What is a ‘prepayment’ option?
It is an option where you can close your loan before the completion of the loan tenure. Pre- payment option can save your lots of money towards the interest payments. It is suggested to keep this as an important requirement when choosing a bank for your home loan.
7. Are there any tax benefits associated with home loan?
There are many Tax Benefits that are associated with home loan. You can claim for both the interest and principal component of your repayments during the year.
8. Important points to remember
- Try to keep the tenure of the loan as low as possible as more EMIs means more interest paid.
- Check and judge the quality of your home loan provider.
- Remember to avail the applicable tax benefits.
- Question and consult friends who have taken similar home loans.
9. Simple Checklist
- What is the rate of interest?
- Basis of EMI computation- daily, monthly or annual
- Reputation and quality of service
- Extra charges- what are they?
- Is pre-payment option offered? Is there a penalty involved?