Purchasing your dream home is one of the biggest financial decisions a family ever takes. Many people prefer taking a home loan for fulfilling their dream of homeownership. But just like finding a perfect home is a challenging journey, similarly finding right home loan after understanding its terms and conditions completely is a herculean task. If you are applying for the home loan for the first time and have not much knowledge about it, acquaint yourself with these basic facts.
- Eligibility Criteria
Before granting a home loan to any individual, financial institutions assess the eligibility of a person to avail the loan. And this eligibility assessed upon primary factors like total income of a person and his repayment capacity. The secondary factors like age, financial position, number of dependents, spouse income, etc., are also assessed.
- Loan Amount
A person can only get up to 90% of property’s value as the loan amount from any NBFC and financial institution. Some lenders even sanction only 75-80% of the property’s value as the loan amount. For instance, if you are interested in buying residential property of Rs.50 Lakh, you can get maximum loan of Rs. 40 lakh. It is necessary to arrange remaining funds by yourself.
- Type of Home Loan
The three kinds of loan offered to the general public are:
Fixed Loan Rate – In this kind of loan, the rate of interest remains fixed and is applicable throughout the loan tenure.
Floating Loan Rate – This kind of loan is directly related to the lender’s benchmark rate. If the rate increases, home loan rate also increases and vica-versa.
Combination Loans – This loan comprises of certain part of the loan at floating rate and remaining part at a fixed rate.
- Tenure of Home Loan
Depending upon the customers’ eligibility, the maximum tenure of the home loan is 30 years. Longer the loan tenure, lower would be the Equated Monthly Installment (EMI).
- Tax Benefits on Home Loan
As per Income Tax Act, a person can claim deduction on the interest paid on home loan subject to maximum of Rs. 1,50,000 for each financial year.
Once you have decided all these points, financial institutions ask for certain set of documents. The documents required for evaluating the home loan application are:
- KYC (Know Your Customer)Documents including identity proof and address proof
- Income documents. For salaried employee, last three months of salary slip and for self-employed, income tax returns for last three years will require
- Property Documents like title deeds, agreement to sell, etc., for conducting due diligence on the property. These documents mortgaged with the financial institutions as security interest till the time a borrower does not pay its entire home loan.
Indubitably, purchasing a home is an expensive proposition. Home loan reduces the financial burden by arranging required amount of money at the times of need. But it is pertinent to keep yourself armed with important terminologies of home loan and do not hesitate in asking in case of any confusion from the lenders.
At Investoxpert, we help individuals by arranging home loan and completing all necessary documents on their behalf.