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A home loan is a credit facility offered by financial institutions and banks that allows the borrower to purchase or build a home. The home (property) is taken as a security by the lender for the home Loan. Important factors such as loan amount, interest rate, loan tenure, monthly EMIs on the house loan, and credit score need to be considered while seeking a house loan. The lender will hold all the legal rights to recover the unpaid loan balance by selling the property in question if the borrower is unable to pay the dues.

Home loan benefits fluctuate across different lenders and loan schemes. Some of the expected benefits are listed below:

Different Purpose: 

Housing loans are multi-purpose loans available for different purposes. This includes the purchase of a new residential flat or building, the construction of a new house on a plot, the reconstruction of your home, or the expansion/renovation.

Long Tenure:

Depending on the loan amount, the home loan repayment tenure typically ranging between 20 and 30 years (varies from lender to lender). This gives you the benefit of lower EMIs, greater flexibility of repayment, and ensure that your monthly budgets are not under any pressure.

High Loan Financing:

Banks finance 75 to 90 percent of the market value of your property as a home loan. The residual sum is paid by you as a down payment when the home loan is used.

Prepayment Allowed:

The prepayment means payment of the balance of the outstanding loan before the original tenure of the loan is completed. It now depends on the lender whether it allows you to pay in full or in parts beforehand.

Prepayment and Foreclosure: 

Home loans provide the facility of foreclosing or prepayment of a loan so that borrowers can pay more than the EMI or can prepay the loan. This marks home loans as a customer-friendly product. Also, there is no penalty on pre-payment of housing loan.

Tax Benefits on Housing Loan: 

The housing loan is correlated with desirable tax advantages. For repayment of the principal amount, a deduction of up to INR 1.50 Lakh is available under Section 80C. Furthermore, a deduction of up to ₹ 2 Lakh is available for the interest amount paid in a financial year on a home loan under Section 24 of Income tax act.

Depending on the type of borrower, the eligibility criteria for a home loan differ. Here are some of the crucial eligibility criteria for home loans that need to be kept in mind:

Age limit: 

The age should be between 18-60 years for salaried and 21-65 years for self-employed.

Earning Amount:

A minimum net monthly income of INR 20,000-25,000 is considered for salaried and self-employed individuals to get their loan sanctioned.

Employment Tenure:

Salaried individuals need to serve in the organization for at least one year. In contrast, self-employed individuals need to have a continuous business tenure of at least two-three years. 

Credit Score:

750 or above with a good credit history

Note - The eligibility criteria explained above can vary from one lender to another.

When applying for a home loan, don’t forget to submit the below-mentioned documents required by the lender.

Documents for Salaried

fiber_manual_recordCompletely filled Home loan application with photograph

fiber_manual_recordIdentity Proof - Aadhaar Card/ PAN Card//Driving License Voter ID Card / Passport 

fiber_manual_recordAddress Proof– Aadhaar Card /Utility Bill/ Maintenance Bill/Passport

fiber_manual_recordIncome Proof – Latest 3 months’ salary slips, form 16, and last one-year bank statement

fiber_manual_recordProperty Documents – Copy of approved plan for construction/ extension, sale deed, conveyance deed, share certificate, allotment letter, possession letter, and latest property tax receipt, list of documents & sanction letter given by existing banker (If applicable)

Documents for Self-Employed

fiber_manual_recordCompletely filled Home loan application with photograph

fiber_manual_recordIdentity Proof– Aadhaar Card/ PAN Card//Driving License Voter ID Card / Passport

fiber_manual_recordAddress Proof– Aadhaar Card /Utility Bill/ Maintenance Bill/Passport

fiber_manual_recordIncome Proof– Latest 3 years income tax returns, last one-year bank statement, balance sheet, audit report.

fiber_manual_recordBusiness Existence Proof– Shop Establishment Act /Any Tax Registration Copy /Company Registration license

fiber_manual_recordProperty Documents– Copy of approved plan for construction/ extension, sale deed, conveyance deed, share certificate, allotment letter, possession letter, and latest property tax receipt, list of documents & sanction letter given by existing banker (If applicable)

There are primarily two types of interest rates for home loans charged by most banks: Fixed and Floating Interest Rate.

1. Fixed Interest Rate:

The fixed interest rate remains the same throughout the lending period, thus keeping the EMI home loan stable. When the current home loan rate of interest is shallow, and an upward trend is predicted in the future, it is easier and better to apply for a home loan at a fixed rate of interest. However, considering the recent trend of lowering lending rates, banks give consumers the option of converting to variable/floating interest rates for mortgage loans after a fixed period of time has been completed.

2. Floating Interest Rate:

The floating interest rate, also referred to as the variable interest rate, is subject to current market lending rates, which may change during the loan tenure. As per the interest rate movement, home loan EMIs can increase or decrease. With the recent trend of declining home loan rates, applying for home loans at a floating rate of interest would benefit prospective home loan borrowers.

Note: Nowadays, most banks prefer the floating interest rate because it costs less than fixed-rate debt,thereby helping in reducing the overall cost of borrowing for the debtor.

The home loan process involves three steps:

Step 1: Submit relevant documents that verify your income, age, address, and identity. After the submission of the documents, the verification process begins by the lender.

Step 2: In the verification process, the lender will check whether you are eligible for the loan or not. If you pass the eligibility criteria set by the lender, then you get loan approval. Otherwise, your application will get rejected.

Step 3: After getting the approval, the loan amount will be disbursed to your bank account.

You are supposed to pay off the debt after you have taken out a loan, by the end of the tenure of the loan repayment through EMIs.However, if you plan to pay off your loan prior to the expiration of the loan repayment period, it is called pre-payment or foreclosure.

There are 2 types of repayment. They are full pre-payment and part pre-payment.

Full Pre-Payment: You pay off the entire unpaid loan balance before the expiration of the tenure of the loan repayment.

Part pre-payment: You pay off a part of the entire unpaid loan balance before the end of the loan repayment tenure.

Tie-ups with Banks/Financial Institutions: We have formed alliances with numerous banks and financial institutions.

Unbiased Expert Advice: We take pride in offering unbiased advice to our customers regarding Balance Transfers and other products. Our specialists use their knowledge of the market to inform you which lender is best for your cause.

Hassle-free Process: You don’t have to worry about visiting banks numerous times to check the loan application status. We handle all the process and keep you in the loop to ensure that you get the updated information.

No Hidden Costs: We don’t charge any fees to the borrower.

Attractive Cashbacks: Receive cashback and vouchers when you are applying for a loan through us.

Step 1: Fill the eligibility form

You must complete the eligibility form in the first step, which involves filling in the following details:

fiber_manual_recordFull Name (As per PAN Card)

fiber_manual_recordMobile Number

fiber_manual_recordEmail Address

fiber_manual_recordCurrent Residence Pincode

fiber_manual_recordCurrent Residence City

fiber_manual_recordEmployment Type

fiber_manual_recordMonthly Income

fiber_manual_recordDesired Loan Amount

Step 2: Select from the multiple offer(s)

Based on the information you provided in Step-1, you will be given a list of lenders by our representative. Pick the lender that you wish to go ahead with from the list. But, please remember to consider the following points when picking the lender:

fiber_manual_recordInterest rate offered

fiber_manual_recordLoan amount

fiber_manual_recordLoan Tenure

fiber_manual_recordEMI

Step 3: Apply for the loan

In this step, you have to give detailed information about your Home details and bank details.Once you submit your loan application, our representative will contact you to cross verify the details before sending the application to the selected lender.

Let’s see an example of a home loan to understand better:

You have a home loan of Rs. 30 lakh for 30 years at 7% p.a. rate of interest.

Using Two Formulas:

EMI (Flat Rate Method) = (p + total interest payable)/ n

Here,

Total interest payable = (p*interest rate*n)/100

EMI (Reducing Balance Method) = [p x r x (1+r)^n]/[(1+r)^ (n-1)]

Where,

p = Principal amount

r = Monthly basisrate of interest

n = Loan repayment tenure in months, (Principal + Total Interest Payable)/ Loan Tenure in Months

EMI= 57,710

Parameters Flat Rate Method Reducing Balance Method
Loan Amount Rs. 30 lakh Rs. 30 lakh
Tenure 360 months 360 months
Interest Rate 7% p.a. 7% p.a.
Total Interest Rs. 63 lakh Rs. 41.9 lakh (approx.)
EMI Rs. 25,833 Rs. 19,959
Savings* Rs. 2,11,4913

The below comparison table contains popular home loans along with their processing fees, and interest rate:

Banks Interest Rate (p.a.) Processing Fees
Kotak Mahindra Bank 6.75% 0.50%
Citibank 6.75% Rs. 10,000
Union Bank of India 6.80%* Rs. 5,000 - Rs. 15,000
Bank of Baroda 6.85% Rs. 8,500 - Rs. 25,000
Central Bank of India 6.85% Rs. 1,500 - Rs. 20,000
Bank of India 6.85% Rs. 1,500 - Rs. 20,000
State Bank of India 6.90% Rs. 4,000 - Rs. 17,400
HDFC LTD 6.90% Rs. 3,000 - Rs. 4,500
ICICI Bank 6.90% Rs. 3,000
LIC Housing Finance 6.90% Rs. 10,000 -Rs. 15,000
Axis Bank 6.90% Rs. 10,000
Canara Bank 6.90% Rs. 1,500 - Rs. 10,000
Punjab and Sind Bank 6.90% Full Waiver
IDFC First Bank 7.00% Rs. 5,000 - Rs. 5,000
Bank of Maharashtra 7.05% Rs. 10,000
Indian Overseas Bank 7.05% 0.50% (Max Rs. 20,000)
Punjab National Bank 7.10% 0.35% (Max Rs. 15,000)
United Bank of India 7.10% 0.59% (Rs. 1,180 - Rs. 11,800)
UCO Bank 7.15% 0.15% (Rs. 1,500 - Rs. 15,000)
DBS Bank 7.20% 0.25% (Max Rs.10,000)
IDBI Bank 7.40% 0.50% (Rs. 2,500 - Rs.5,000)
HSBC Bank 7.45% 1% (Max Rs. 10,000)
KarurVysya Bank 7.45% Rs. 5,000
Saraswat Bank Home Loan 7.55% Nill
Jammu and Kashmir Bank 7.70% Rs. 500 - Rs. 10,000
South Indian Bank 7.90% 0.50% (Rs. 5,000 - Rs. 10,000)
PNB Housing Finance 7.90% 1.00% (Min. Rs. 10,000)
Federal Bank 7.90% Rs. 3,000 - Rs. 7,500
Standard Chartered Bank 7.99% 1%
Aavas Financiers 8.00% 1.00%
Karnataka Bank 8.17% Rs. 250
Sundaram Home Finance 8.60% 0.50%
Dhanalakshmi Bank 8.25% Rs. 10,000
Tata Capital 8.50% 0.50%
Tamilnad Mercantile Bank 8.65% Rs. 15,000
IIFL 8.70% 1.25%
DHFL Housing Finance 8.75% Rs. 2500
Bandhan Bank 8.75% 1% (Rs.5,000)
Yes Bank 8.85% 1% (Rs. 10,000)
Hudco Home Loan 8.95% NA
Indiabulls 8.99% 2%
Aditya Birla 9.00% 1%
GIC Housing Finance 9.10% Rs. 2,500
Reliance Home Finance 9.75% Rs. 3,000 - Rs. 6,500
Shriram Housing 10.49% NA
India Shelter Finance 13.00% 2.00%

1.

Who can be co-applicant/co-borrowerfor a joint home loan?

Your family members are theco-applicants/co-borrowerswho can go for a joint home loan with you, such as your father, mother, siblings, etc. Other than that, your spouse or adult children will also be co-applicants.

2.

How many people can be co-applicant/co-borrower for a home loan?

Up to 7 individuals are actually eligible for a joint home loan with the primary applicant.

3.

How home loan EMI is calculated?

The Equated Monthly Instalment (EMI) is the amount you repay per month against your home loan's principal amount and interest rate. Thus, both the principal amount and the unpaid interest on the loan are considered when determining the EMI home loan.

4.

Is the security required for a home loan?

A home loan is a secured loan requiring the borrower to mortgage the property with the lender.The lender has the right to attain the property in the event that an individual fails to repay the home loan on time.

5.

Who can be a guarantor for a home loan in India?

A guarantor is an individual above the age of 18. He/she should have an excellent financial history and a stable source of income. Apart from this, they should be sure about the credibility of the loan applicant.

6.

During my Home Loan tenure, can I switch from a fixed rate to a floating rate?

During my Home Loan tenure, can I switch from a fixed rate to a floating rate?

7.

Is balance transfer a good idea for home loan?

Absolutely, if you get a higher interest rate than the market rate and you pay a higher EMI than other banks, you can choose to move the balance of the home loan and reduce your monthly burden.

8.

Does home loan prepayment reduce interest?

You get the option of either reducing your EMI or the loan tenure when you make a prepayment of a home loan. If you want to reduce the tenure of the loan and keep the EMI the same, the overall outgoing interest amount would be lower compared to the outgoing interest amount for the same tenure.

9.

What is the difference between a fixed rate and floating rate home loan?

Please refer to ‘Details of Home Loan Interest Rates’ section.

10.

How long it takes to get home loan sanctioned?

It normally takes 2 weeks to get approved for home loans.

11.

Which factors determine my home loan eligibility?

Please refer to ‘Home Loan Eligibility Criteria’ section.

12.

When does my loan repayment period begin?

The loan repayment period starts only after the loan provider has disbursed the whole home loan sum. However, in most situations, you would be expected to pay interest, i.e., pre-EMI, every month on the partly disbursed loan. (This happens in the case of under construction property)

13.

Does having a home loan affect home loan eligibility?

The lender guarantees that your monthly repayments are not impacted by any other existing loans, such as home loans, two-wheeler loans, etc. when deciding your home loan eligibility. However, when your total purchasing power is limited, other ongoing loans inevitably appear to impact your eligibility. Your home loan application may be denied if your other loan obligations surpass 50 percent -60 percent of your monthly income.

14.

Can I avail home loan balance transfer?

Of course, you can use the home loan balance transfer service to save on the overall outgoing interest. The transfer of the balance is a mechanism by which, at lower interest rates, the outstanding loan balance is passed to another lender.