What is a home loan?
A home loan is a secured loan from a financial institution to buy a residential property. You can avail of a home loan to buy a ready-to-move-in house, apartment, or one under construction. Home loans can be availed from both banks and Non-Banking Financial Companies (NBFCs).
Which is the best bank for a home loan?
Before signing up for a home loan product, it’s best that you compare loans offered by different banks and lending institutions. While comparing, consider the interest rate, Loan-to-Value (LTV) ratio, processing fees, and tenure offered by the bank. Use a home loan EMI calculator and calculate your EMI based on these factors. Compare multiple home loan products by various banks by using this method. Also, certain lenders roll out home loan offers with reduced interest rates from time to time. Keep an eye on that too while looking for a loan. Also, know your requirements first before applying. You can go through the above list to get an idea regarding which bank’s home loan would suit your requirements.
How long it takes to get a home loan sanctioned?
Usually, it takes 3 to 4 weeks to get a home loan sanctioned. However, you need to keep a few factors in mind for a better understanding. First of all, you need a pre-approval of your home loan from the concerned lender to get your loan sanctioned. However, pre-approval doesn’t always mean that your loan will be disbursed immediately and depends on certain external as well as internal factors. For instance, your loan sanction can be delayed if there’s a delay in the submission of property or income-related documents.
Which factors determine my home loan eligibility?
Banks/financial institutions consider the following factors such as your age, annual income, occupational stability, resident type, number of co-applicants, credit score, ongoing loans if any, etc. when determining your loan eligibility.
What is the difference between a fixed-rate and a floating-rate home loan?
The rate of interest associated with fixed-rate loans remains unchanged during the entire tenure of the loan. On the other hand, the interest rates applicable on floating rate loans can be revised from time to time depending on the RBI key policy rates. The equated monthly installments can increase or decrease depending on the prevailing RBI rates in the case of floating-rate type loans.
Can I prepay my outstanding home loan amount?
Yes, you can choose to prepay your outstanding loan amount either partially or in full before the completion of your loan tenure. While banks do not charge any prepayment fee on floating-rate loans, fixed-rate home loans attract a penalty of up to 2% of the loan amount if prepaid through refinance.
Can I avail of tax deductions on my home loan?
Yes, you can avail of tax benefits on both the interest and principal component paid against your home loan. As per Section 80C of the Income Tax Act, you can avail of deductions up to Rs.1.50 lakh on the principal amount repaid annually. Under Section 24 of the IT Act, taxpayers are also eligible for benefits up to Rs.2 lakh on the interest repaid against a home loan annually.
Who can be a co-applicant?
The co-applicant can be an immediate family member such as your spouse, your parents, or even your major children. It is also mandatory for all co-owners of the property to be co-applicants while applying for a loan. However, the co-applicant need not be a co-owner.
What is Pre-EMI?
Pre-EMI is defined as the interest that is to be paid to the loan provider until the entire loan amount is disbursed. The Pre-EMI is payable on a monthly basis until the last disbursement, post which the regular EMI will be applicable comprising the principal and interest components.
What is MCLR?
Marginal Cost of funds-based Lending Rate is the benchmark rate set by a lending institution below which they cannot provide loans to their customers.
Can I switch from a fixed rate to a floating rate during my home loan tenure?
Yes, you can switch from a fixed to a floating rate of interest on your home loan during the repayment tenure. However, you will be charged a conversion fee by the lender in such cases.
When does my loan repayment period begin?
The loan repayment period begins only after the loan provider has disbursed the entire home loan amount. However, you will be required to pay the interest i.e. pre-EMI on the partially disbursed loan on a monthly basis, in most cases.
Can I take 2 home loans at the same time?
Yes, you can take 2 home loans at the same time provided that your lender approves your eligibility to manage 2 Equated Monthly Instalments (EMIs) at the same time. However, the tax benefits on the second house will be different and you will be required to establish the property as self-occupied or let-out property.
Can I get 100% financing on a home loan?
No. Banks/financial institutions do not grant 100% of the property value as a home loan. Home loan lenders establish a margin on their loan i.e. the percentage of the cost that the lending institution will be covering. For example, if the margin on the loan is set at 10%, the bank will cover 90% of the property value. In such cases, you will be required to make a down payment of the balance amount, i.e. 10% in order to cover the rest of the cost.
Does having a personal loan affect home loan eligibility?
When determining your home loan eligibility, the lender makes sure that your monthly repayments are not being affected by any other ongoing loans such as personal loans, two-wheeler loans, etc. However, other ongoing loans ultimately tend to affect your eligibility as your overall spending power is reduced. If your other loan commitments exceed 50%-60% of your monthly income, your home loan application may be rejected.
Is a personal loan better than a home loan?
If you are buying a house, a home loan is the best option. Usually, you will not be eligible for a personal loan for as high an amount required for the purchase of a house. If you want extra money for non-specific personal needs, then go for a personal loan. Home loans also have an added advantage of top-up loans wherein you can request a top-up on your loan amount to cover additional needs such as furnishing your house.
Can I buy a house with two loans?
No, you cannot avail of two home loans for the same property. Any such practice will be considered fraudulent. The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) ensures that fraudulent practices such as availing two housing loans for the same asset/property are prevented.
How do joint home loans work?
A joint home loan can be availed by adding a co-applicant such as your spouse, parents, or an immediate family member on your application. Adding a co-applicant will increase your home loan eligibility as the lending institution will also be considering the co-applicant’s income and credit score when determining your loan eligibility. All co-owners of the property are required to be the co-applicant for a loan. However, the co-applicants need not necessarily be the co-owners of the concerned property.
A home loan is a secured loan that is obtained to purchase a property by offering it as collateral. Home loans offer high-value funding at economical interest rates and for long tenures. They are repaid through EMIs. After repayment, the property’s title is transferred back to the borrower.
Though data claims could not be immediately substantiated, the conversation revealed that financial institutions now have potential disbursement portfolios five times bigger than those five years back.
A total of 13 banks and NBFIs are taking part in the fair, where a maximum of Tk 2 crore can be availed as a home loan. The land or flat is kept mortgaged until the loan is paid back.
The IPDC is offering home loans at 7.99 per cent interest marking the fair and already five clients have availed spot approvals of loans, according to him.
Top Home Loan Schemes & Offers
Kotak Mahindra Bank – Best for Low-Interest Rate
Low interest rates start from 8.75% p.a.
Processing fee of up to 0.50% of the loan amount
Loan tenure of up to 20 years
Zero prepayment charges
Balance transfer with top-up loan available
Canara Bank Housing Loan – Best Interest Rate for Women
Low interest rates for women starting from 8.85% p.a.
Maximum repayment tenure of 30 years
Processing fee of up to 0.50% of the loan amount
It Can be used to purchase or construct a house/flat
Zero prepayment charges
Axis Bank Home Loan – Best Interest Rate for Salaried Employees
Low interest rates starting from 9.00% p.a.
Loan amounts of up to Rs.5 crore
Maximum repayment tenure of 30 years
Processing fee of up to 1% of the loan amount
No prepayment/foreclosure charges
HDFC Reach Home Loans for self-employed professionals
Attractive interest rates start from 8.45% p.a.
Flexible repayment tenure of up to 30 years
Processing fee of 2% of the loan amount
Minimal documentation with a minimum income of Rs.2 lakh p.a.
Add a woman co-owner for lower interest rates
SBI Privilege Home Loan for Government Employees
Low interest rates starting from 9.15% p.a.
Home Loan Fees & Charges
Depending on the type of loan you are applying for, the following charges may be levied:
Processing fees: This is a one-time non-refundable fee to be paid to the home loan provider after the loan application has been approved. The processing charge varies depending on the bank and the loan scheme you are applying for.
Prepayment charges: The Prepayment penalty is the fee you will have to pay the lender if you plan on repaying your home loan before the completion of the loan tenure.
Conversion fees: Some banks also charge a conversion fee when you switch to a different loan scheme to lower the interest rate associated with your current scheme.
Cheque dishonor charges: The fee is levied when the loan provider finds that a cheque issued by the borrower is dishonored due to insufficient funds in the borrower’s account.
Fees on account of external opinion: In some cases, you should consult an external expert, such as a lawyer or a valuator, for their opinion on the loan. This fee should be paid directly to the concerned person, not the lending institution. This fee should be paid directly to the concerned person, not the lending institution.
Home insurance: The premium should be paid directly to the concerned company during the term to ensure the insurance policy runs during the home loan tenure.
Default charges: Loan providers also penalize delayed repayments, i.e. if you fail to make your Equated Monthly Instalments (EMIs) or Pre-EMIs on time. The defaulting charges vary from one bank to another.
Incidental charges: This charge covers the expenses incurred by the bank to recover dues from a borrower who has failed to make his monthly installments on time.
Statutory/regulatory charges: The fee includes all costs associated with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), Memorandum of Entry and Deposit, and stamp duty. You can visit www.cersai.org.in to learn more about these charges.
Photocopy of documents: The fee is payable to the bank if you require a photocopy of your home loan documents for personal needs.
Change in loan term: Some banks also charge a nominal fee if you wish to change the tenure associated with your loan.
How to Check Home Loan Eligibility with BankBazaar?
Use the home loan eligibility calculator to check which banks you are eligible for a home loan. You can easily compare and choose the best home loans with the help of the home loan eligibility calculator available on BankBazaar. The process is simple and only basic details will need to be entered. The procedure to check your eligibility via BankBazaar.com is mentioned below:
What to do if your home loan application is rejected?
You can always re-apply for a home loan if your first loan application was rejected by the lender. However, there are a few aspects you must consider before doing so.
Credit score: Since housing loans are generally long-term retail loans, lenders look into the applicant’s repayment capacity before approving or rejecting a loan application. Your credit score plays a major role in deciding your repayment capacity against a loan.
Loan Amount: Since purchasing/constructing a home is a one-time investment, we often tend to overlook the financial costs involved in it. Banks and financial institutions fix the maximum loan amount you are eligible for by taking your present monthly income. There is a high chance your application was rejected because of the loan amount you have applied for.
If the loan amount applied for exceeds your eligible loan amount, the lender can decide to reject your application. In such cases, you can consider increasing the down payment on your home loan to bring down the loan amount.
Other Ongoing Loans: Banks can also choose to reject your home loan application if you have too many other ongoing loans. Since home loan lenders see to it that not more than 50% of your monthly income is being contributed to your loan repayments, any other ongoing long-term loans can result in your application being rejected.
Having too many ongoing loans will not only impact your personal finances but also your repayment capacity. Hence, it is advised to clear the ongoing loans, if any, before you apply for a housing loan.
Co-applicant: There can be instances where applications are rejected due to low income. In such cases, you can consider adding a co-applicant such as a member of your immediate family. This will increase the maximum amount you are eligible for as the income and creditworthiness of the co-applicant will also be taken into account while deciding your eligibility.
Employment: In some cases, the employment of the applicant can act as the deciding factor on whether the loan application is being approved or rejected by the lender. Your application can be rejected if the lender learns that you have been switching between jobs frequently.
Unstable employment can sometimes prove to have a negative impact on your loan application. On the other hand, stable employment with a recognized institution on your application can have a positive impact.
In case your housing loan application was rejected, and you have only been working with the current employer for a short period of time. You can consider giving it some more time before re-applying for another one.
Documentation: Housing loans include a lot of documentation such as identity proof, residential proof, bank account statements, income tax returns, income proofs, property papers, documents approved by concerned authorities, etc. Your loan lender can reject your loan application even if one of the required documents is not submitted.
You can always consult the banks’ customer relationship executives to assist you with proper loan documentation.