HOME LOAN

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WHAT IS A HOME LOAN?

Home Loan is a loan provided by a bank or a financial institution for the purchase of a residential property.  The loan can be used to purchase a  new/ resale house, construct a house or to buy an under-construction house from a builder. The same property will serve as a security.

The demand for home loans is very high in India.  Apart from fulfilling the dream of own house, it also helps in wealth creation in the long term. Property is proven to be an appreciating asset since the price of the house is expected to rise over a period of time. This makes financing of such a purchase by borrowing a smart method to own and create an asset without having all the funds for the purpose at the moment.

 

SIGNIFICANCE OF HOME LOAN:

The property prices  in India have shot up quite significantly. Owing a house from one’s savings  is a  a very difficult task . With rising levels of income and  loan offers from virtually every banks makes it easy for fulfilling this basic need . The loan is secured in nature and hence the tenure  offered for such loans are very high when compared to other loans. The rate of interest is also very low vis a vis other loan products. The uniqueness of home loan is the borrower get benefited from tax savings because interest out flow up to Rs. 150000 during a financial year can bet set off against  salary/business income . Similarly principal amount to the extend of Rs 100000 can also be  availed as a deduction under Section 80 ( C) of the Indian Income Tax Act , 1961. The ability to repay the loan over a long time period also makes the entire borrowing affordable for the individual because it fits the monthly outgo within his/her income. It is the easiest way to create an asset thereby giving tax benefits as well.

 

SPECIAL FEATURES OF HOME LOAN :

  • Home Loans Are Secured Loan
  • The Property Financed Is Mortgaged With The Financier
  • Home Loans  Are Typically Long Term Loans
  • Repayment Option Of Upto 20 Years
  • The Interest Rates Are Low
  • Borrower Can Avail Tax Benefits
  • Property Can Be Jointly Owned
  • Income Of Family Members Can Be Clubbed For Higher Loan
  • Can Be Used For Investment Purpose

ELIGIBILITY CRITERIA FOR HOME LOAN

Home loans are sanctioned after taking into consideration several factors . Some of the criteria are listed below:

The Property Should Have A Clear And Marketable Title

  • The Property To Be Funded Should Be Approved By Banks/Financial Institutions.
  • The Applicant Should  Have A Stable Source Of Income.
  • The Applicant Must Be At Least 21 Years Of Age.
  • Loan Tenor Is Determined By The Retirement Age Of A Person.
  • The Maximum Tenor Of A Home Loan Is 20 Years.
  • Previous Credit History Plays A Vital Role In Sanctioning Of Loan.
  • Loan Eligibility Depends On The  Net Earnings Of The Applicant And The Repayment Capacity.
  • Eligibility Would Also Depends On  Valuation Of The Property .
  • Spouse’s Income Can Be Added  For Enhancing Loan Eligibility.

POINTS TO REMEMBER

The below mentioned points need to be kept in mind while availing a home loan 

  • Funding May Vary In The Range Of 80% To 85% Depending On The Financier.The Balance Portion  Need To Be Taken Care By The Borrower From His Savings Or Other Sources.
  • In Case Of Resale Property, Look For The Age Of The Property Since Banks Fund  For A Tenor Which They Are Comfortable After Doing A Valuation Of The Property. Most Banks Consider The  Age Of  A Building As 60 Years And The Loan Should Get Over Within This Age Of The Property.
  • If The Property Is Already Approved By A Bank/ Financial Institution, The Faster The Sanction Is.
  • If The Borrower Is Looking To Buy  A Property Which Is Not Approved By A Bank, Then Proper Check Need To Be Done To Ensure The Property Has A Clear And Marketable Title.
  • Banks Offer Both Fixed Rates And Varibale Rates( Floating Rates)
  • Rates  Can Go Up Depending On The Market Conditions. Increase In Rate Can Result In Increase In The Loan Tenor Or Higher EMI -EMI (Use EMI Calculator).
  • Fixed Rates Offered By Banks Need Not Be Fixed For The Entire Tenor Of The Loan.
  • Tax Benefits Offered To Home Loan Borrowers  May Change In Future
  • Any Volatility In Money Market Conditions Which  Affects Bank’s Books Will Have A Cascading Effect On Your Home Loan.
 

DOCUMENTS REQUIRED FOR HOME LOAN:

  1. Photograph
  2. Identity proof  
    I     Pan Card
    II    Adhar Card
    III  Passport
    IV   Driving Licence
    V    Voter Card
    VI   NREGA Card
  3. Address proof
    I    *Electricity Bill 
    II    Adhar Card
    III  Passport
    IV   Driving Licence
    V    Voter Card 
  4. Income proof
    a)   If Business:
          Latest 3 years ITR With Computation of income and certified Financials and all annexure / Supporting Documents if any
    b)   If Salaried:
          Latest 3 Month’s Salary Slip
  5. Bank Statements
  6. Continuity Proof
  7. Qualification proof( applicable only for Self Employed Professionals
  8. Age Proof
    I    Birth Certificate 
    II    Pan Card
    III  Passport
    IV   Driving Licence
    V    Voter Card 
    VI  Adhar Card (If DOB available)
    VII  School Living Certificate 

1 Latest 2 GST Returns if applicable

For all exciting loan accounts statement/repayment track report

1    Copy of Partnership deed 

2   Registration Certificate

3   Identification information as mention under section 15 in respect of the person holding an attorney to transact on this behalf

1   Certificate of incorporation

2   MOA

3   AOA

4   Board resolution for authorized signatory authorizing him/her for signing on behalf of company for loan purpose

5   Identification information of the officer or employees age mention under section 15 in respect of manager, officer of employees holding an attorney to transact on its behalf

1   Trade licence

2   Statutory licence other supporting documents

1   Latest 6 month’s bank statement all business accounts (Saving & Current)

2   Any other bank accounts form where any EMI is Deducted 

Required 

1   Copies of all the property documents of the concerned property to be mortgaged for the loan.

2   All previous chain of agreements for the property if any.

3   For Balance Transfer – List of property documents mortgaged to exiting financier and foreclosure statement of the exiting loan. 

Loan agreement, repayment instrument- NACH/SI, Signature verification and any other related documents for Mortgage creation.