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Home Loan

Who is eligible for a home loan?
Any individual above the age of 21 years and below the age of 65 years, who is of Indian origin, Indian Resident and Non-Resident Indian can apply for a home loan. Apart from this, eligibility is calculated based on the factors such as age, income, qualifications, number of dependants, spouse's income, assets, liabilities, stability and continuity of occupation and previous credit history.

What happens if there is a change in status from Non-Resident Indian to Resident Indian? 
In such a case, the bank will reassess the repayment capacity of the applicant based on resident status and will prepare a revised repayment schedule with a new rate of interest as per the currently applicable rate on Resident Indian loans (for that specific loan product). The revised rate of interest will be applicable only on the outstanding balance.

What is the maximum amount of housing loan that can be availed?
The usual margin is 85% of the total cost of the property inclusive of the cost of land. This maximum amount is subject to a sealing of Rs 1 crore.

 Is a guarantor required while applying for a home loan?
Yes. The bank requires a guarantor to ensure that the loan is paid back on time. The guarantor will be responsible for the repayment of the loan in case the borrower is unable to do so.

How does one repay the loan?
The loan can be repaid in monthly installments, which usually commence after a month of the loan disbursement.

What is the period in which I will have to repay the loan?
The period is fixed usually to a maximum of 20 years, but in all circumstances before one’s retirement age.

What is pre-EMI interest?
Pre-EMI interest is the interest paid on the portion of the loan disbursed, before final disbursement. This pre-EMI interest is payable every month from the date of each disbursement up to the date of commencement of the EMI.

What is the difference between fixed rate loan and floating rate loan?
A fixed rate loan is the rate of interest that remains constant throughout the extent of the loan period, while a floating interest rate is when the rate of interest varies according to the rates in the market during the tenure of the loan.

Are there any extra expenses that will have to be incurred while availing the loan?
Yes. These expenses include processing and administrative fees, stamp duty, pre-payment charges & delayed payment charges, legal fees, technical fees and registration fees.

How is interest calculated on the home loan?
Banks usually follow the daily or monthly reducing balance method.

What security does one have to provide?
A first mortgage of the property to be financed. The title should be clear marketable. Some banks may collateral security like the assignment of life insurance policies, pledge of shares, NSCs, units or mutual funds, bank deposits or other investments.

What is the Agreement for Sale and where can one register it?
The agreement between the builder and the buyer is known as the Agreement for Sale. It can be registered at the office of the sub-registrar appointed by the State government.

What tax benefits are available on a home loan?
Under Section 88 of the Indian Income Tax Act, 1961, a rebate of 20% is allowed on the principal repayment of the loan up to Rs10, 000. For self occupied houses, the income tax exemption limit for interest paid on housing loans is Rs 75,000. The Tax Certificate will be issued at the end of the financial year.

Is it legal to sell the property on which the loan has been taken?
Once the complete loan amount has been repaid, the property can be sold, although some banks also allow the transfer of loan to the buyer of the property.

Is it legal to rent the property on which the loan has been taken?
Yes, it is legal.

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.

 When will I be liable to pay Property Tax?
One is liable to pay Property Tax from the year of Registration of property, as per the Indian financial year (1st April- 31st March).


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