HOME LOAN

Overview !

Your Home is a place where you relax after coming back from your day’s tiring work, it is that place where you can give time to your family & spend beautiful moments with them. To acquire a home which can be christened your “Own House” is a life-time decision & has to be taken with a lot of planning & requires huge finances. Your Dream Home is not very far away with a Home Loan which will fulfill your Dream into a reality. We at Loan Factory are working constantly to get you the BEST Loan Deal & have brought a small guide which would answer some important questions related to Home Loan & help you decide your loan deal.

What is home loan ?

Home Loan is a Secured Loan offered against the security of a house/property which is funded by the bank’s loan, the property could be a personal property or a commercial one. The Home Loan is a loan taken by a borrower from the bank issued against the property/security intended to be bought on the part by the borrower giving the banker a conditional ownership over the property i.e. if the borrower is failed to pay back the loan, the banker can retrieve the lent money by selling the property.

Types of Home Loan
There are different types of home loans available in the market to cater borrower’s different needs.

Home Purchase Loan : This is the basic type of a home loan which has the purpose of purchasing a new house.

Home Improvement Loan : This type of home loan is for the renovation or repair of the home which is already bought

Home Extension Loan : This type of loan serves the purpose when the borrower wants to extend or expand an existing home, like adding an extra room etc.

Home Conversion Loan: It is that loan wherein the borrower has already taken a home loan to finance his current home, but now wants to move to another home. The Conversion Home Loan helps the borrower to transfer the existing loan to the new home which requires extra funds, so the new loan pays the previous loan & fulfills the money required for new home.
Bridge Loan: This type of loan helps finance the new home of the borrower when he wants to sell the existing home, this is normally a short term loan to the borrower & helps during the interim period when he wants to sell the old home & want to buy a new one, It is given till the time a buyer is found for the old home.

Home Construction Loan : This type of loan taken when the borrower wants to construct a new home.

Land Purchase Loan : It is that loan which is taken to purchase a land for construction & investment purposes.

Documents required in Home Loan


Generally the documents required to processing your loan application are almost similar across all the banks; however they may differ with various banks depending upon specific requirement etc. Following documents are required by financial institutions to process the loan application:
• Age Proof
• Address Proof
•Income Proof of the applicant & co-applicant
• Last 6 months bank A/C statement
• Passport size photograph of the applicant & co-applicant

In case of Salaried

• Employment certificate from the employer,
• Copies of pay slips for last few months and TDS certificate
• Latest Form 16 issued by employer Bank statements

In case of Self-employed

• Copy of audited financial statements for the last 2 years
• Copy of partnership deed if it is a partnership firm or copy of memorandum of association and articles of association if it is a company
• Profit and loss account for the last few years
• Income tax assessment order

Home Loan Process & various steps involved
There are various steps involved in getting a Home Loan from selecting your property to filling up the loan application. Following are the various stages in Home Loan:

• The first step involved in the process is to find your property which is followed by the verification of property documents, post that the documents are examined & simultaneously you can start searching for the lender who can offer the BEST Home Loan Deal after checking your eligibility criteria.

Know the Home Loan Eligibility : Banks offer the loan amount only after checking your profile & based on various eligibility criteria’s like age, income & salary banks lend you the money.


Eligibility...


How is Eligibility Calculated?
Various factors are taken into account when assessing the repayment capacity. Income,
age, number of dependants, qualifications, assets and liabilities, stability/ continuity
of employment / business and subject to maximum provided by the bank, to name some factors.

How can eligibility be increased?
Your spouse can be a co-applicant if he/she is earning. The incomes can be clubbed
to enhance your loan amount.
You can also include Parents/Children as Co-Applicants for higher eligibility.
Additional securities like bonds, fixed deposits and LIC policies may also help to enhance
eligibility .

Who can apply for a Home Loan ?
Salaried Individuals
Self employed Professionals/Business men
NRIs

Requirements.
Min Age should be 21 years when the loan is sanctioned.
The loan tenor is from 5 years - 25 years subject to a maximum till 58/60 years or
retirement, whichever is earlier in case of salaried and for self-employed before 65 years.
The final amount to be sanctioned will depend on the repayment capacity and the
maximum provided by the lending bank.
CO-Applicant can be taken for overcoming the age barrier as well.

What are the Features of Home loan?

* Attractive interest rates.
* Door-step service from enquiry till loan disbursal.
* Balance transfers from other banks possible.
* Maximum loan 80/90% of the cost of the property (including the cost of the land)
and based on the repayment
alignment of the customer.
* Floating and Fixed Home Loan Interest available.

Various rates offered in Home Loans:
Floating Rate
Fixed Rate

Floating Rate Home Loan
Loan under Floating/Adjustable Rate is linked to Retail Prime Lending Rate rates of banks.
The Rate of interest will be revised every time there is a change in Retail prime lending rate.
Generally the EMI is retained and the tenor of the loan is increased /decreased as applicable.

Fixed Rate
Currently some banks are offering fixed rates only for 3-5 years.

Repayment
Repayment is normally done through Equated Monthly Installments (EMIs) comprising both
principal and interest. Normally post dated cheques (PDC) are taken in advance ranging
from 12 months onwards
Documents Required.
The following documents needs to be submitted for Pre-Approval
* Application form with photograph.
* Identity and Residence Proof.
* Latest 6 months Salary-slips-for salaried.
* 3 years I T Returns-for self employed.
* Education/Qualification Certificate.
* Proof of business existence- min 3 years..
* Form 16/ Last 3 years Income Tax returns.
* Business profile .
* Last 6 months bank statements.
* Processing fee cheque for valuation payable to the bank.

Fees
Currently ranges from 0.5%- 1.5% of the loan amount applied plus applicable
service taxes and cess
Part Payment/Prepayment.
Part /Prepayment of loan is possible. Charges vary from bank to bank.

Important Pointers in Home Loan
Increase your Loan eligibility
Credit History : Your chances of getting a home loan are increased if you have a good credit history which is known by banks by checking the borrower’s Cibil score. Now it is very hard to get a loan from another bank when you already have a bad debt with one bank.

Clubbing of income : Your eligibility to take a home loan will augment when you club your income with your spouse’s income, bank in this case will calculate your eligibility on the basis of the clubbed income of both the applicants. You can club incomes of spouse, children & parents staying with you and having regular income.

Enhance your loan tenure : Longer is the loan tenure, lower will be the EMIs which further increases the repayment capacity of the borrower & in turn enhances the loan eligibility.

• Step-up Loan: In this type of loan EMIs remain low in the beginning & increase gradually as and when the borrower’s spending power increases. Therefore lower EMIs in the initial years enhances the borrower’s ability to pay & further increases the loan eligibility

Increase the down payment : You must know that in a home loan bank finances only 85 to 90% for the property & the rest amount has to be funded by the borrower. You should increase the down payment if you have more than required amount which will mitigate your debt considerably.

Tax Benefits in Home Loan
The home loan borrower enjoys Tax Benefits on both Interest paid & the Principal re-paid. Under Section 24(d) of Income Tax, the deduction of interest payable on the home loan is up to a maximum of Rs. 1, 50,000.
Under Section 80(c) of Income Tax, Principal amount for the repayment of loan along with other savings & investments is eligible for tax deduction up to a maximum limit of
Rs. 1, 00,000.


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