1: Who can apply for a home loan?
2: When can a home loan be applied for?
3: How does the lender calculate
eligibility?
4: How do I repay the loan?
5: What is pre-EMI interest?
6: Is there a fixed interest rate for the
duration of the loan?
7: What is a fixed rate loan?
8: What is a floating rate loan?
9: It is better to opt for a fixed or a
floating interest rate?
10: Is there a difference between monthly
rest & annual rest?
11: What are the other areas of
expenditure before I get a home loan?
12: Is a guarantor required?
13: Can I repay the loan before the set
date of repayment?
14: How do I select my HFC?
15: Can a loan be switched over if I have
obtained it at a high rate of interest, but another HFC is
offering a better interest rate?
16: What is the maximum amount of housing
loan available?
17: What is the amount I can borrow and
what are the criteria?
18: What is the period in which I will
have to repay the loan?
19: How is the interest calculated on my
loan?
20: How do I apply for a loan?
21: Who can be co-applicants for the
housing loan?
22: What security do I have to provide?
23: Does the Agreement for Sale have to be
registered?
24: Does the property have to be insured?
25: How long does it take to get my
application processed and my loan sanctioned?
26: When do I have to make my share of the
contribution to the purchase price of the property?
27: What do I have to do when my housing
loan is sanctioned?
28: In how many installments can the loan
be disbursed?
29: Do I get tax benefits on the loan?
30: Can I get a loan for extension /
upgradation / renovation of my house?
31: Can I sell the property on which I
have taken the loan?
32: Can I rent the property on which I
have taken the loan?
1: Who can apply for a home loan?
Any Indian Resident, Non-resident Indian or Person of Indian
Origin can apply for a home loan if they are 21 years of age at
the origin of the loan and 65 years or below at loan maturity.
Housing Finance Companies (HFCs) usually give home loans for
properties located in India to people who are employed or
self-employed, with a regular source of income.
2: When can a home loan be applied for?
An individual can apply for a home loan even before the property
has been selected. The loan amount is sanctioned based on the
ability to repay. This helps in planning a budget while
purchasing the house.
3: How does the lender calculate eligibility?
Loan eligibility is calculated based on the ability to repay.
Factors such as income, age, qualifications, number of
dependants, spouse's income, assets, liabilities, stability and
continuity of occupation and savings history are taken into
consideration.
4: How do I repay the loan?
You can repay the loan in Equated Monthly Installments (EMIs)
comprising principal and interest. Repayment by EMIs commences
from the month following the month in which you take full
disbursement. Till then, you only need to pay the interest on
the amount disbursed.
5: What is pre-EMI interest?
Before final disbursement, you may have to pay interest on the
portion of the loan disbursed. This is called pre-EMI interest.
Pre-EMI interest is payable every month from the date of each
disbursement up to the date of EMI commencement.
6: Is there a fixed interest rate for the duration of the loan?
Most HFCs offer the fixed rate as well as the variable rate
options to customers.
7: What is a fixed rate loan?
A rate of interest that is constant throughout the duration of
the loan is known as a fixed rate loan.
8: What is a floating rate loan?
A floating rate is when the interest rate on the loan changes
according to the rates in the market during the period of the
loan.
9: It is better to opt for a fixed or a floating interest rate?
If interest rates are falling, a floating rate loan is a better
option. But when interest rates are rising, opt for a fixed rate
loan, because you will then know in advance what your EMIs will
be.
10: Is there a difference between monthly rest & annual rest?
On the basis of the principal at the start of every month, the
interest is calculated in monthly rest. For annual rest, this is
done at the beginning of every year.
11: What are the other areas of expenditure before I get a home
loan?
Processing and administrative fees, pre-payment charges and
delayed payment charges, legal fees, technical fees, stamp duty
and registration of mortgage deed are all likely areas of
expenditure.
12: Is a guarantor required?
A guarantor is insisted on by the HFC so as to ensure that the
loan is paid back in full and in time. The guarantor is
responsible for the repayment of the loan if the borrower is
unable to do so.
13: Can I repay the loan before the set date of repayment?
You could do this, but some HFCs require a pre-payment fee to be
paid. Check with your HFC.
14: How do I select my HFC?
Various considerations would help you zero down on the HFC most
suitable for your loan requirements. Analyse the following
points before taking your decision:
Loan amount: The minimum and maximum loan amounts
vary between HFCs. Find out if the amount you require falls
within this limit.
Duration: There is no lower and upper limit to
the tenure of the loan. Find out if the time limit you want
it for can be accommodated. This varies between HFCs.
Normally HFCs offer loans ranging form 5-20 years, with some
going up to 30 years. For NRIs the maximum tenure could be
10 years in some cases. Depending on your requirements, this
would have a bearing on the loan you opt for.
Interest rate: This varies between HFCs. Fix a
duration that you want the loan for and find out the EMI
from them. Compare and identify the lowest EMI.
Pre-payment: Check if the HFC charges for
repaying the loan before its due date.
Flexibility: Find out whether you can change your
interest scheme from fixed to variable if so desired or if
there are restrictions.
Guarantor: Some HFCs require this, while others
don’t.
Documents required: These may vary between HFCs
although there are a few standard documents like proof of
income, proof of age and residence and a salary slip.
Co-owner: If there is to be a co-owner or
co-applicant for the loan, the HFC has to accept the
relationship between the two.
Other fees: Each HFC has different fees for
administration and processing among others.
15: Can a loan be switched over if I have obtained it at a high
rate of interest, but another HFC is offering a better interest
rate?
You could do this. After discussing the reasons with the current
HFC, they may even reconsider the interest rate.
16: What is the maximum amount of housing loan available?
The maximum amount is 85% of the cost of the property, including
the cost of land, subject to a maximum amount of Rs 1 crore.
17: What is the amount I can borrow and what are the criteria?
Generally, the amount is up to 2.5 times your gross annual
income. But your equated monthly installments usually should not
exceed 35 per cent of your gross monthly income. Besides this,
HFCs will assess your eligibility based on your ability to
repay.
18: What is the period in which I will have to repay the loan?
Usually in a period of between 5 to 15 years, but definitely
before you retire. A few HFCs also offer a 20-year repayment
period, usually at a higher interest rate.
19: How is the interest calculated on my loan?
Most HFCs follow the yearly reducing balance method, which
accounts for your principal repayments only at the end of their
financial year. Thus you pay interest on the principal that you
have already returned to the HFC during the year. The effective
interest rate is thus higher than the quoted interest rate by
around 0.7 per cent. Banks and some HFCs, in contrast, follow
the daily or monthly reducing balance method, which results in a
lower interest burden.
20: How do I apply for a loan?
Approach an HFC with the latest salary slip and TDS Form 16
of the last two financial years for yourself and your
co-applicant. The loan officer will informally tell you the
amount of loan you are eligible for and the terms, in areas
in which they finance homes.
Collect a loan application form and confirm the needed
documents.
Visit more than one company since you are likely to get
better terms / larger loan amount if you shop for the best
deal.
At your chosen HFC, submit the duly filled loan application
along with the required documents and an application fee
(around 1 per cent). They will then interview you on the
same. After conducting an appraisal of your application, the
HFC will give an in-principle sanction of your loan.
You now have to submit your property documents, which should
show a clear title. The HFC will check these and levy an
administrative fee (around 1 per cent). It will then
disburse the loan, either fully or in installments, directly
to the builder / seller of the property.
21: Who can be co-applicants for the housing loan?
Usually a spouse can be a co-applicant. Other immediate family
members are also acceptable to some companies, depending on
merits. If both partners are working, it is better to have your
spouse as a co-applicant since this will entitle you to a much
larger loan.
22: What security do I have to provide?
A first mortgage of the property to be financed. The title
should be clear marketable. Some HFCs may also require
collateral security like the assignment of life insurance
policies, pledge of shares, NSCs, units or mutual funds, bank
deposits or other investments.
23: Does the Agreement for Sale have to be registered?
Yes. In many Indian states, the agreement between the builder
and purchaser has to be registered. This can be done at the
office of the sub-registrar appointed by the State government.
24: Does the property have to be insured?
The property should be insured against fire and other hazards
and the HFC will have to be the beneficiary of the policy.
25: How long does it take to get my application processed and my
loan sanctioned?
It will take around 15 days for the processing of your
application if your documents are in order. Make an application
only if you are eligible for the loan since the HFC will not
return the application-processing fee. It will take another week
for the company to check out your property papers and make the
disbursement.
26: When do I have to make my share of the contribution to the
purchase price of the property?
You will have to make your payments towards the property price
up-front before the HFC disburses any installment of the loan.
27: What do I have to do when my housing loan is sanctioned?
You must submit the property papers and pay an administrative
fee (approximately 1 percent). When the HFC clears these papers,
you must take the first disbursement of the loan within a
stipulated period (usually three months) and avail of the entire
loan within about a year's time.
28: In how many installments can the loan be disbursed?
The loan can be either disbursed in full for outright-purchase /
ready properties or in a few installments for under construction
properties. The disbursement will be made taking into account
the requirement of funds and the progress of construction.
29: Do I get tax benefits on the loan?
Yes. You are eligible for certain exemptions on both the
principal and interest components of the loan as per the Income
Tax Act, 1961. The principal repayment of the loan up to Rs
10,000 is eligible for a rebate @ 20 per cent U/s 88 of the IT
Act. The income tax exemption limit for interest paid on housing
loans is Rs 75,000 per annum on self-occupied houses. Therefore
an interest payment of up to Rs 6,250 per month can be deducted
from taxable income in arriving at the total income tax payment
of an individual.
30: Can I get a loan for extension / upgradation / renovation of
my house?
Yes, these loans are available from some HFCs. However the loan
terms may be different from the usual housing loans.
31: Can I sell the property on which I have taken the loan?
Yes. But the loan will have to be repaid before the sale is
effected. Some HFCs allow the transfer of loan to the buyer of
the property, depending on his eligibility for loan.
32: Can I rent the property on which I have taken the loan?
Yes, this is allowed by HFCs.
