Buying a home has become a lot easier due to the availability of home loans. With the easy availability of home loans, a prospective homebuyer can buy any residential property in Greater Noida or Gurugram within their desired budget. However, when a person applies for a home loan, financial institutions use a number of technical terms which may sound unfamiliar to him. This blog covers the most important technical terms frequently used by financial institutions while processing the home loan application.
- Down Payment or Margin – Most of the bank sanctions 80-85% of the property value as a home loan. The remaining money needs to arrange by the borrower. For instance, you want to buy a house for Rs. 40 lakh and bank sanction an amount of Rs. 32 lakh so the borrower arranges the remaining Rs. 8 Lakh. This remaining money referred to as margin or down payment.
- Equated Monthly Installments – Popularly known as EMI, it is the monthly amount borrower needs to pay the bank to repay the home loan. This amount contains both loan amount i.e. principal and interest amount. After considering the loan amount, rate of interest and tenure of the loan, EMI’s are pre-determined.
- Credit Appraisal – Before sanctioning the home loan for any residential property in Greater Noida West or Gurugram, banks check the repaying capacity of the borrower. For checking this, parameters like age, income, employer creditworthiness, assets, liabilities, etc., considered. After evaluating these parameters, financial institutions decide about sanctioning the loan and the loan amount.
- Pre-Approved Property – Banks conduct sanity check before approving any residential property for a home loan. On the basis of information furnished by the developer about the project, the sanity check takes place. It is important for a buyer to remember the fact that the “pre-approved” property does not imply it is 100% safe for making an investment. Thus, the buyer should follow vigilant attitude and make necessary checks at his end before investing any ready-to-move-in or under construction residential properties anywhere be it Gurugram or Mumbai.
- Pre-EMI – Disbursal of some loan takes place in part i..e part of the loan disburses during the construction of the project and remaining part after the completion of construction. On such properties, the borrower needs to pay pre-EMI which includes only interest amount. The principal amount of the loan starts once the financial institutions disburse the complete loan amount. So, for under-construction properties and partial disbursement mode, the borrower needs to pay Pre-EMI until the completion of construction of the project.
- Collateral/Security – Banks always play safely while granting home loans, thus ask the borrower to keep any asset as security to the financial institutions. This asset is termed as security or collateral. In case, the borrower defaults the payment, the financial institutions use the asset to recover their money.
- Post Dated Cheques – Also referred to as PDC’s, such cheques contain the future date and cleared after the arrival of mentioned date. Generally, financial institutions ask the borrower to give one or two-year PDCs used for deducting home loan EMI in the form of ECS.
- Sanction Letter – It is the confirmation letter from the financial institutions stating that a person is eligible for the home loan. This letter contains information about the home loan amount, EMI, tenure, rate of interest, etc. Even after giving the sanction letter, the financial institutions reserve the right to cancel the loan in case of any property title or other issues.
- Disbursement Mode - After verification of legal documents pertaining to applicant and property, loan amount disbursal process takes place. Usually, loan disbursement of residential property takes place in three forms:
- Advance – Advance disbursement implies when entire amount of home loan disbursed before completion of construction of a residential project.
- Partial – Partial disbursement is when part of the loan disburses during the construction of the project and the remaining part is disbursed after completion of the project successfully. Most of the financial institutions adopt partial disbursement mode while granting a home loan on residential property in Gurugram and Greater Noida West.
- Full – When disbursal of complete loan amount takes place after the completion of construction of the project.
In case you are facing any problem in applying for home loan, seek valuable assistance from reputed real estate consultants of Noida, India.