The Home Loans of the past was a complicated affair, with tons of paperwork and countless visits to the banks. The act of availing home loans in India was the definition of exhaustion. Back then information regarding the same was limited and held only by experts. There weren't any newsletters nor Home Loan FAQ back then. But now things have changed thanks to the healthy competition amongst Financial Institutions.
People now have the opportunity to choose the schemes and the best home loans that best suit them. For the lot who are still riddled with the intricacies for availing one, here’s a Home loan FAQ sheet from Homes247.in to help lower your load!
1. What are the types of Home loans available?
Banks usually offer the following types of home loans in India on interest:
Home Purchase Loan: For the purchase of a Residential Property
Home Improvement Loan: For facilitating repair and renovation at home
Home Extension Loan: For the expansion or extension of an existing home
Land Purchase Loan: For the purchase of a plot for either a residential property or as an investmental assest( farms etc).
Home Conversion Loans: For people who have an existing home loan on the current home and are looking to buy a new home. The existing home loan will then be converted into the new home.
Balance Transfer Loan: These loans are availed when somebody wants to transfer their existing home loan from the current bank to another bank. It is usually done to repay the outstanding loan amount at lower interest rates or when a customer is unhappy with the services provided by his existing home loan provider and wants to switch to a different bank.
NRI Home loans: For NRI’s looking to invest in India and the purchase of a home
Loan against Property (LAP): Loans availed against the mortgage of a property as a collateral
2. What are the main documents one should possess or obtain before buying a new property?
• Sale Deed
• Title Deed
• Approved Building plans
• Completion Certificate (For Newly constructed property)
• Commencement Certificate (For Under-construction property)
• Conversion Certificate (If agricultural land is converted to non-agricultural)
• Land Khata Certificate
• Encumbrance Certificate
• Latest Tax Receipts
• Occupancy Certificate
3. What is an EMI?
EMI or Equated Monthly Instalment is a prefixed amount paid to the bank every month. EMI’s are fixed initially when you avail of a home loan. An EMI comprises of the cumulative sum of the interest and the principal amount of the loan over a prefixed period.
4.Will the EMI remain constant throughout for the Home Loans in India?
EMI rates can be increased if the applicant wills it so. This is usually done to reduce the overall tenure of the loan.
5. What are the types of insurances available with Home Loan?
Term Insurance is a life insurance policy that provides coverage for a certain period of time. In case of death of the insured individual during the policy term, the death benefit is paid by the company to the beneficiary. Ex: (SBI Suraksha) SBI Life Insurance Company
Property Insurance is an insurance policy that covers private residences and protects them from any unforeseen, unpredictable damages and natural disasters.
6. What are the various documents needed to apply for a home loan?
The following is the list of documents that are needed to be submitted when one applies for a Home Loan.
Proof of Identity: PAN, Driving license, Voter ID, Aadhar Card
Proof of Income:
• Salaried Applicants: Latest 3 Months salary slip showing all deductions and Form 16 for the last three years.
• Self Employed Applicants: IT returns for the past 2 years and an audit of income for the last 2 years as certified by a CA
7. How is the home loan interest in India( rate ) calculated?
There are different methods for this:
Annual Reducing method: In this system, the interest is calculated on the reduced principal amount at the end of every year. Thus, you continue to pay interest on a certain portion of the principal amount that has been paid back to the lender.
Monthly Reducing method: In this system, the principal amount for which you pay interest, reduces every month as you pay your EMI. This means that the EMI in the monthly reducing system is effectively less than the annual reducing system.
Daily Reducing method: In this system, the principal amount for which you pay interest reduces from the day you pay your EMI. EMI in the daily reducing system is effectively less than in the monthly reducing system. (A year is treated as consisting of 365 days irrespective of it being a leap or non-leap year.
8. What is a down payment?
Generally, banking & finance institutions pay around 75% to 85% of the total cost of the property bought. The remaining 25% to 15% of the amount that is paid on and an up-front basis, is popularly known as the down payment.
9. What is the average tenure of a home loan?
As home loans involve a large sum of money, the average tenure varies between 3 to 30 years.
10. What is the procedure involved in obtaining a house loan?
11. Are there any securities needed for home loans?
In most of the cases, the property (home to be purchased) itself is taken as security. Additional security is asked when or if your income is not justifying your EMI. However, additional security submission varies according to lending institutes.
12. What are the other charges that accompany a home loan?
Processing charges, Mortgage Origination Fee and other miscellaneous charges depending on the bank you've chosen.
13. What are the benefits of housing loan?
14. What are the eligibility criteria for an NRI to procure home loans in India?
Any Non-Resident Indian with a passport and a Valid Entry Visa can apply for a Home Loan. The NRI should also possess a PIO/OC card if they have a passport from another country. A resident Indian POA is required for availing of the loan. If the Passport has a NO ENTRY stamp then it is not valid for a home loan.
The above list comprises only the major doubts and questions which are frequently asked by the customers. However there many other facets to acquiring Home Loans in India, which we shall update periodically in our blogs. Stay tuned for the latest updates.