What are the types of home loans?
There are a variety of home loans you can benefit from:
Home purchase loan: Common loan for purchasing a home.
Home improvement loan: Loan given for implementing repair works and renovations to your home.
Home construction loan: Loan available for the construction of a new home. Home extension loan: Given for expanding or extending an existing home – e.g. addition of an extra room, etc.
Land purchase loan: Sanctioned for purchase of land, for both home construction or investment purposes.
Bridge loan: Designed for people who wish to sell the existing home and purchase another. The bridge loan helps finance the new home, until a buyer is found for the old home.
NRI loans: Tailored for the requirements of NRIs wishing to build or buy a home in India
Balance Transfer: To pay off an existing housing loan and avail of the option of a loan with a lower rate of interest.
Refinance Loans: To pay off the debt you have incurred from private sources such as relatives and friends, for the purchase of your present house.
Can a Non Resident Indian avail of housing loans?
Yes, depending upon the eligibility criteria and policy of the bank.
How much can a person borrow?
Loans are generally sanctioned upto 80% of the cost of the property. The balance money is to be funded by the purchaser from his own contribution. The percentage of loan would vary from bank to bank.
How is the rate of interest calculated in India?
Interest rates vary from time to time and from institution to institution. The interest calculated either on a daily or monthly reducing or yearly reducing balances.
What is a fixed-rate housing loan?
A fixed-rate housing loan is a loan where the rate of interest is constant through the entire term of the loan period.
What is the difference between monthly reducing interest rate and yearly reducing interest rate?
In a monthly reducing interest system the principal on which interest is paid reduces every month as EMI is paid. In the annual reducing system the principal is reduced at the end of the year, and the borrower pays interest on a certain portion of the principle, which is actually paid back to the lender. The EMI for the monthly reducing system is effectively lesser than the yearly reducing system of calculating interest.
What is the best way to select the cheapest home loan?
Keep the loan period constant and calculate the total amount paid for the home through the different loan options available
What are the repayment period options?
Repayment period options range generally from 5 to 20 years. Some of the banks may give loans up to 30 years also.
What are the other costs that usually accompany a home loan?
Home loans are usually accompanied by the following extra costs:
Processing Charge: It’s a fee payable to the financial institution on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount required by you cannot be less than the processing fee.
Pre-payment Penalties: When a loan is paid back before the end of the agreed duration, a penalty is charged by some banks/companies, which is usually between 1% and 2% of the amount being pre-paid. Some Banks allows upto 20% part payment of a loan in a year without any pre-payment charges.
Commitment Fees: A commitment fee is charged in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned. However, now-a-days most banks /institutions do not levy it.
Miscellaneous Costs: Sometimes Banks may levy a documentation or consultant charges.
What security is required for a housing loan?
In most cases, the property to be purchased itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. Some institutions may ask for additional security such as life insurance policies, FD receipts and share or savings certificates
Do lending companies require guarantors?
Many lending companies don’t ask for Guarantors. One can have co-applicant instead. However, in certain cases 1 or 2 guarantors may be required if the borrower’s profile is not sound.
What is the time required for approval of a loan application?
Varies from Bank to Bank but usually it is bout 3-15 days, subject to proper documentation provided by the Home loan applicant.
What is the time required for disbursement of loans?
Usually loans are disbursed within 7 – 15 days after completion of verification by the institution, documentation (such as handing over of the original agreement for sale / lodging receipt to the lender) and completion of all relevant procedures and only after proof that the borrower’s own contribution has been paid by him to the Vendor / Builder / Developer.
What is the right time to apply for a home loan?
Loans may be applied for before or after selection of property. The loan amounts are sanctioned in principle to let buyers know what amounts they can avail of. This helps them decide their budgets and purchasing power. Actual disbursements are made after satisfactory verification of all necessary documents and completion of specific procedures.
Do institutions accept joint loan applications?
Yes but it varies from Bank to Bank.
What are the tax benefits of home loans
Both principal as well as interest on home loans attract tax benefits under section 80C and 24(b) of the Income Tax Act 1961, with effect from 1st April 2005 (i.e. assessment year 2006-07) .The Principal amount of repayment of loan, along with other savings such as PF, PPF, Life Insurance premium etc., upto a maximum of Rs 1,00,000/- will be eligible for deduction from gross income u/s 80C of Income Tax Act 1961.Interest paid on loan taken before completion of construction is also allowed as deduction from income at 20% per year for the next five years from the year of taking possession For self occupied – Income will be treated as nil and interest payment upto Rs. 1,50,000/- will be allowed as deductible and the loss as such will be adjusted against other income under section 24(b) of the Income Tax Act 1961.For property that is rented out – The full interest amount paid will be adjusted against rental income and the resulting loss if any can be adjusted against other income.
Do lending institutions offer incentives for housing finance?
Sometimes lending institutions offer incentives for a specified period or under a special scheme. Incentives could be like Free accident insurance, Waiving of pre payment penalty, Waiving of processing fee, Property insurance,
Does Gangotri Group, guarantee sanction of loan?
Our team will provide all the necessary assistance and guidance to you to get the loan sanctioned. However, loans are at the sole discretion of the bank