Home loan
Home Loan FAQWe would like to help you easily understand the means and procedures of home loans.
Introducing you to EMI
EMI is the abbreviation of equated monthly installment. This monthly installment is paid by the borrower to the money lender (bank or other financial institutions). Borrower pays a part of the interest and principal amount together as the EMI every month.
Pre-EMI
Once your loan gets sanctioned, the bank pays a certain amount of money to the builder at different stages of the construction process. The builder will have a set of milestones or stages in the work; bank will pay the amount to the builder when these milestones are reached. Pre-EMI is the simple interest the borrower has to pay the bank at a particular rate as agreed upon until the bank delivers the complete amount to the builder and the commencement of the actual EMI.
Various types of housing loans available
There are different types of home loans provided by various banks and other financial institutions which include:
a) Home loan- housing loan given by banks to buy a new house or apartment. Home loans also cover the cost
of parking space, registration fee, stamp duty and other related charges.
b) Home improvement loans- as the name suggests, home improvement loans are meant to provide you the
financial support for carrying out any repair or renovation work in your house.
c) Home construction loans- construction of a new house is possible with the help of home construction loans.
d) Home extension loans- are those loans which are used to build an extension for your existing house or to
expand the house by constructing new rooms etc.
e) Home Conversion Loans- the conversion loan is mainly formulated to help transfer the existing home loan as
a loan for a new house and also reducing the burden of making the pre-payment for the prior loan.
f) Land purchase loans- one can make use of the land purchase loans as an investment option as well as for
the construction of houses.
g) Bridge loans- those loans that help you get the financial support to buy or construct a new house until the
old house is sold off.
h) Balance transfer- one can avail a new housing loan with lower interest rates by paying off the existing home
loan using the balance transfer option.
i) Refinance loans- this loan helps you pay back the amount you borrowed from your friends and relatives to
build or buy your new house.
j) NRI loans- loans for the non-resident Indians who wish to buy a house in India.
k) Stamp duty loans- to pay off the necessary stamp duty amount that is incurred while buying your house.
Eligibility criteria to avail home loans
There are a set of criteria that one needs to possess in order to become eligible to avail a loan. Most important factors that are taken into consideration include age, income and stability of your job.
Age:
• The age of the applicant should be 23 or more in case of professionals, salaried employees, self employed
and business personnel.
• The borrower should also repay the loan amount before attaining the age of 65.
If the above mentioned two points are not satisfied by the applicant, a guarantor satisfying these conditions should be represented as a co-applicant. Cases other than these will be handled by the higher authority of the bank concerned.
Income:
• Annual income of the employee should be more than Rs.1, 00, 000/- in case of professionals, salaried
employees, self employed and business personnel.
• There is also an option to increase the net income of the applicant by clubbing his income with a maximum of
three persons namely with relatives/business partners or co-partners of a property.
Job stability
• A salaried employee applying for the loans should have a minimum of 3 years continuous employment.
• The employee can avail the support of maximum three co-applicants (spouse/children/parents) to increase the
net income for a loan.
• In case of business personnel, his/her venture should be growing continuously for the past 5 years and must
be gaining profit for the last 2 years.
Up to what percentage of the actual cost will a bank or any financial institution bear?
Banks usually provide 85% of the total expense incurred to buy a house and it is the responsibility of the buyer to make arrangements for the rest of the 15%.
Housing loans for NRIs
NRIs can avail housing loans under a condition that the loans should be repaid within a span of 20 years, out of inward remittance or funds through the NRE/NRO/FCNR accounts.
Important documents that have to be kept ready while applying for a housing loan
• Income proof of individuals
• Bank statement of last six months
• Proof of age
• Proof of residence
• Necessary photographs
• Proof of identity (voter ID, PAN, Passport etc)
• Those who are self employed should carry the certified copies of profit and loss statements, balance sheet
and income tax returns statements of past 3 years
• Partnership deed, articles of association and other details about the firm are required in case the company is
private limited or partnership based
• The documents that NRIs need to produce include the latest salary certificate specifying, name (as it appears
in the passport), date of joining, passport number, designation, perquisites and salary, Photocopy of labour
card/ identity card, photocopy of valid resident visa stamped on the passport, photocopy of monthly statement of
local bank account and property related documents.
