Frequently Asked Questions

 

Buying a house is easily be one of the most important financial decisions you’d be taking over the entire course of your life. It’s something that requires a lot of careful thought and consideration. In India, you can take a home loan from any of the large number of banks or Nonbanking Financial Companies (NBFCs). In case you’ve been contemplating taking a home loan, but didn’t know where to start, you’re in just the right place! It is also obvious that whenever you seriously set out to take a home loan, you’d come across all kinds of questions that will need answering. These questions might be related to the eligibility criteria of the home loans, the quantum of the loan, the applicable interest rate, the repayment process etc. We have done all the hard work and have created a comprehensive list of frequently asked questions related to home loans, and have provided their answers below. We sincerely hope that these FAQs help you get the much-needed clarity on this very important loan type.

Home Loan Benefits

Yes, you can avail tax benefits on a home loan. You can avail tax deduction on account of the repayment of principal home loan amount, up to a maximum of INR 150,000 per annum, under section 80 C of the Income Tax Act. On the other hand, tax benefit is also available on the interest rate payment for the home loan, up to a maximum of INR 2 lakh per annum, under section 24 of the Income Tax Act. The latter
can only be availed in case of a self-occupied property.

In cases where there are joint applicants in the home loan, each borrower will be eligible for a total tax exemption of INR 3.5 lakh (INR 2 lakh under section 24 and INR 1.5 lakh under section 80 C) per annum. Therefore, a married couple applying for a home loan can get a maximum tax exemption of up to INR 7 lakh per annum on their home loan.

No, there are no tax benefits available as such for non-resident Indians buying properties in India. They can claim tax benefits only if they file their income tax returns in India and thus become eligible for the concerned tax benefits.

Home Loan Charges

Whenever you apply for a home loan, you need to pay a certain fee/charge to the prospective lending establishment at the time of the loan application, referred to as the processing fee, as well as at the time of sanctioning of the home loan (admin fees). The processing fee amount is usually either a fixed sum or a small percentage of the home loan amount, and is paid towards the completion of the home loan sanctioning formalities. Please note, the actual home loan amount received by you could be lesser than what the processing fee was charged for.

Home Loan Eligibility

You can apply for a wide variety of home loans, depending on your specific needs. A few important home loan types are:

  • Home loan for purchase of a property – The most commonly availed home loan type, this one is granted for the purpose of purchasing an apartment.
  • Home loan for purchase of land – As evident, these loans are granted for the purpose of purchase of land, in order to build a house on it afterwards.
  • Home loan for construction of a house – This type of loan is applied for construction of a house on a piece of land already purchased by the applicant.
  • Home improvement loan – Homeowners that require funds for renovation of their already existing house can avail this type of home loan and do up their home with fresh electrical works, paintwork etc.
  • Home loans for NRIs – These home loans are specifically created for the purpose of Non-resident Indians, to make it easier for them to buy properties in India.
  • Home conversion loan – This home loan product can be availed by existing homeowners to avail a surplus loan amount, over and above their already running loan, for purchase of a new house.

The quantum of your home loan will depend on various factors including your current take-home income each month, the purpose for which the home loan is being taken, whether for renovation or purchase of a property, or for purchasing a plot of land for construction of a house. Apart from that, whether you are a non-resident Indian or a resident Indian will also have a significant impact on the home loan amount you’d be eligible to borrow. In general, banks and NBFCs offer home loan amounts ranging from 75% to 85% of the property cost.

Generally speaking, the eligibility criteria for obtaining an NRI Home loan is the same as home loans extended to resident Indians. But there is special emphasis on the applicant being minimum 18 years in age and having a regular source of income. Furthermore, the applicant must be a PIO (Person of Indian origin) holding a foreign passport or a non-resident Indian (NRI) having a valid Indian passport. Different lenders might have different eligibility criteria for the NRI applicants, however, there’s usually a specific requirement for the applicant to have a certain amount of work experience under his/her belt.

Home Loan EMI

Equated Monthly Instalment or EMI is a fixed sum of money which you’d be expected to pay to the lender each month, to repay the home loan. This fixed sum comprises of both the principal repayment amount as well as the interest rate. A home loan’s EMI is calculated by factoring in multiple parameters like the loan amount, the interest rate and the home loan’s tenure. We offer an easy to use and
comprehensive Home Loan EMI and Repayment Calculator on our website, thus making EMI calculation extremely easy. Using this tool you can alter the loan amount, interest rate and tenure, to take a quick look at the home loan EMI, within a matter of a few seconds. Once you arrive at a reasonable and comfortable EMI depending upon your budget, you can go with the corresponding loan amount and
make your dream home a reality.

Whenever banks and NBFCs sanction home loans for an apartment in a big construction project, the EMI payments don’t usually start right away. In such a scenario, the lender can only charge pre-EMI interest on the disbursed loan amount. A pre-EMI is basically an EMI option wherein you would be required to pay just the interest component of the home loan amount disbursed during the construction phase of the project. This disbursal is usually made in phases and hence the interest is calculated only on the part of the total home loan which has been disbursed so far. The actual EMIs begin only after you get the possession of the house.

Home Loan Process

It is fairly easy to avail a home loan through our website. You can go through all the home loan offers available to you based on your eligibility criteria, and thereafter go ahead with the bank or NBFC whose offer you like the best. However, please keep in mind that the final home loan approval will be at the sole discretion of the sanctioning officer. S/he would arrive at the decision after considering the exact home loan eligibility criteria set by the corresponding lender. In general most of the banks and NBFCs take around 5 to 10 days for approval of a home loan, provided all the documents are in place. Thereafter, another week is needed for the lender to inspect the property papers and make the loan disbursement.

Yes, you can bring in a co-applicant into your home loan application. This co-applicant can be your immediate family member such as your parents or your spouse. A major benefit of including a co-applicant in a home loan is that it improves your chances of getting a bigger home loan amount.Sometimes a co-applicant becomes mandatory if the primary applicant has a low credit score or had defaulted any of his/her loan/credit card payments in the past.

Lenders normally require a mortgage of the property that the home loan is being taken for. In cases where the mortgage can’t be provided, the lender would take any other tangible security. It is very important for the property to have a clear title, as certified by an approved advocate of the lender. The additional securities, often referred to as collateral securities, accepted by the lenders are in the form of guarantees or life insurance policies (wherein the surrender value is equal to the home loan amount), deposit of mutual fund units, shares or other forms of securities. You need to get in touch with the concerned lender to get exact details on the acceptable securities.

Taking a home loan through our website is an extremely easy process, and involves three basic stages:

  • Stage 1 – In stage 1, you provide all the details needed in the home loan eligibility calculator – the required home loan amount, your existing loan commitments, net income per month and the required interest rate. Once these details are provided, the calculator will tell you if you are eligible for the home loan or not. If yes, what will be the EMIs. Other than that, you’d also be informed about the maximum
    home loan amount you are eligible for, as well as its EMIs.
  • Stage 2 – In stage 2, you’d be able to go through and compare personal loan offers extended by various banks and NBFCs, based on your eligibility. You can go with any of the available lenders, depending upon your requirements.
  • Stage 3 – This stage will involve the online submission of the home loan application and instant e-approval of the home loan. Once this is done, an executive from our team will contact you and help you with the remaining process.

Please also refer to the “What is the procedure of availing a home loan?” above

A home loan is usually disbursed only after the concerned property has undergone technical appraisal, all the legal documentation work has been completed and the borrower has made his/her contribution in full.

The home loan amount can be disbursed either in full or in suitable part instalments, not exceeding 3 in number, factoring in the construction progress as well as the need for funds, based on an assessment carried out by the lending establishment (Bank or NBFC).

Lenders normally require a mortgage of the property that the home loan is being taken for. In cases where the mortgage can’t be provided, the lender would take any other tangible security. It is very important for the property to have a clear title, as certified by an approved advocate of the lender. The additional securities, often referred to as collateral securities, accepted by the lenders are in the form of
guarantees or life insurance policies (wherein the surrender value is equal to the home loan amount), deposit of mutual fund units, shares or other forms of securities. You need to get in touch with the concerned lender to get exact details on the acceptable securities.

The market value of a property is the estimated amount for which the property can be potentially sold in the market place, depending upon the existing market conditions, at the given point of time.

Following is the list of documents you must check before purchasing a new property:

  • Title deed
  • Sale deed
  • Occupancy certificate
  • Approved building plans
  • Commencement certificate in case of an under construction property
  • Completion certificate in case of a newly constructed property
  • Khata certificate, particularly if the property is situated in Bengaluru
  • Latest tax receipts
  • Conversion certificate if the concerned property was converted from agricultural to nonagricultural land
  • Encumbrance certificate

Other than the various eligibility criteria laid out by the lending establishments, the primary basis on which the home loan amount is generally calculated, is the EMI to NMI ratio. NMI is your take home income after various payroll deductions as well as taxes. The EMI/NMI ratio normally ranges from 20% to 70%. As also highlighted in one of the questions above, you can significantly increase the approved loan amount by bringing in a co-applicant into your home loan application.

Yes, you can apply jointly with your spouse, in which case both your salaries will get factored in for calculation of the home loan amount. If not your spouse, you can even bring in your parent/s, as a co-applicant in your home loan application. In that case, the income of the parent/s will also be considered for calculating the home loan amount.

In most cases, home loans are usually be disbursed within 3 to 10 days, after all the documentation has been completed to the bank/NBFC’s satisfaction and all the required procedures have been duly completed.

Although in general you’d be allowed to sell the property even while the home loan is outstanding, you must get in touch with the lender to learn about the exact terms and conditions. In most cases, you’d allowed to sell after having obtained the consent of the lender. If the buyer of the property wants to take a home loan, the process will be much easier if s/he takes it from the same lender. In such cases,
the bank/NBFC won’t need to release the property documents to a different lender, before receiving payment. On the other hand, if the buyer wishes to make an outright payment for the property, s/he can make it directly to the lender. The property documents will be released only after the lender receives the complete loan amount and all dues are cleared.

Lenders normally require a mortgage of the property that the home loan is being taken for. In cases where the mortgage can’t be provided, the lender would take any other tangible security. It is very important for the property to have a clear title, as certified by an approved advocate of the lender. The additional securities, often referred to as collateral securities, accepted by the lenders are in the form of
guarantees or life insurance policies (wherein the surrender value is equal to the home loan amount), deposit of mutual fund units, shares or other forms of securities. You need to get in touch with the concerned lender to get exact details on the acceptable securities.

As also mentioned earlier, home loans are normally disbursed within 3 to 10 days of satisfactory completion of all the documentation formalities and completion of the required procedures. Usually, it takes around 2 weeks for the processing of a home loan application, and 1 more week for the lender to carry out property papers’ inspection and make the loan disbursal.

There are certain steps you can take to verify the authenticity of the property documents shown by the seller, depending upon the type of the property. You can verify the project approvals from the office of the sanctioning authority or the Corporation. The authenticity of the ownership documents can be confirmed by checking the registration details at the Sub Registrar’s office. In case you are buying an apartment in a society, you can verify the share certificates of the society directly from the society itself.

If you’re buying a resale property, you must ensure that the seller has: sale deed, latest tax receipts, possession certificate, building plan approvals, clear and marketable title, encumbrance certificate and occupancy certificate.

Home Loan Repayment

Home loans are considered long-term borrowing instruments, having tenures ranging from 5 years to 30 years. The exact tenure of your home loan will depend upon multiple factors such as the sanctioned loan amount, your repayment capacity etc. The longer the tenure of your home loan is, the lesser will be the EMI, however, you’d end up paying more interest. On the other hand, even though you’d be paying a higher EMI for a home loan with a shorter tenure, the loan will get repaid faster and hence you’d be paying a considerably lower interest amount to the lender.

Yes, you are allowed to repay the home loan amount before the completion of its scheduled tenure. This can be done by making a lump-sum payment to pay off the entire outstanding amount. However, please keep in mind that the lender might apply certain penalties ranging from 2% to 3% of the outstanding principal amount, in such foreclosures. Having said that, please also note that there are some NBFCs and banks too, which don’t charge any such foreclosure penalty.

You can repay the availed home loan in multiple ways, including through issuance of post-dated cheques for the entire tenure of the loan, automatic deduction of the home loan EMI from your salary or via Electronic Clearing System (ECS) each month, by providing relevant instructions to your bank.

Home loans are considered long-term borrowing instruments, having tenures ranging from 5 years to 30 years. The exact tenure of your home loan will depend upon multiple factors such as the sanctioned loan amount, your repayment capacity etc. The longer the tenure of your home loan is, the lesser will be the EMI, however, you’d end up paying more interest. On the other hand, even though you’d be paying
a higher EMI for a home loan with a shorter tenure, the loan will get repaid faster and hence you’d be paying a considerably lower interest amount to the lender.

Yes, you are allowed to repay the home loan amount before the completion of its scheduled tenure. This can be done by making a lump-sum payment to pay off the entire outstanding amount. However, please keep in mind that the lender might apply certain penalties ranging from 2% to 3% of the outstanding principal amount, in such foreclosures. Having said that, please also note that there are some NBFCs and banks too, which don’t charge any such foreclosure penalty.

In case of NRI home loans, the loan is normally repaid through direct remittances from the foreign country, via usual banking channels or through any of the permitted financial accounts by the RBI, over the entire tenure of the home loan. In general, the repayments are made via FCNR, NRE, NRO and NRNR accounts. Please note, the eligible account types might change from time to time based on RBI regulations.

As is applicable to home loans extended to the resident Indians, the repayment period of the home loans extended to NRIs can also be a maximum of 30 years, ensuring that the entire home loan amount gets liquidated by the time the applicant reaches the retirement age or 60 years, whichever is earlier.

Home loans are considered long-term borrowing instruments, having tenures ranging from 5 years to 30 years. The exact tenure of your home loan will depend upon multiple factors such as the sanctioned loan amount, your repayment capacity etc. The longer the tenure of your home loan is, the lesser will be the EMI, however, you’d end up paying more interest. On the other hand, even though you’d be paying
a higher EMI for a home loan with a shorter tenure, the loan will get repaid faster and hence you’d be paying a considerably lower interest amount to the lender.