HOME LOANS

Many banks offer loans to buy or construct a home, refinance a home loan availed from other institutions and also to extend existing home. They will also finance purchase of land, from approved agencies and help construct a self-contained flat in an existing or proposed co-operative society, in an apartment owners’ association or even an independent single-family or multi-family bungalow or row house.

Maximum loan one can avail is up to 80% of the cost of the property, including the cost of the land. This is however subject to a valuation of the property, as assessed by the bank.

Eligibility will subject to the repayment capacity as determined by the bank. It takes into consideration factors such as income, age, qualifications, number of dependents, spouse’s income, assets, liabilities, stability and continuity of occupation and savings history. And, of course, the bank’s main concern is to make sure that the borrower can comfortably repay the amount.

At any time after the applicant has decided to acquire/construct a property, even if the property has not been selected or the construction has not commenced.

To start with collect the application form from any of the respective bank’s offices or download one from their website and submit it along with supporting documents at any nearest office. On receipt of the completed application form with the processing fees, the bank will consider the application, make enquiries as it deem necessary and convey its decision.

Many banks also offer the option of applying for a housing loan online, by just logging onto their official website. After it is approved, walk in to the selected bank office for submission of documents and further processing.

Can an applicant apply for a loan to repay a housing loan availed from another bank / housing finance company?

Yes, the applicant can avail bank’s home loan to repay a loan availed from employer or another bank / housing finance Company.

What are the fees and charges payable and when are they payable?

  • Allotment letter of the co-operative society / association of apartment owners
  • Copy of approved drawings of proposed construction purchase / extension
  • Agreement of sale / sale deed / detailed cost estimate from architect / engineer for the property to be purchased / constructed / extended / renovated
  • If an applicant is in the present employment / business or profession for less than a year, then in a separate sheet details of occupation for previous 5 years, position held, reasons for change and period of the same has to be written in detail
  • Applicable Processing Fees

Proof of Residence: Attested copy of any one of the following:

  • Ration Card
  • Passport
  • Bank Account Statement
  • Voters Identity Card
  • Current Telephone / Electric Bill
  • Letter from recognized public authority
  • Letter from Employer (subject to the satisfaction of the bank)

Proof of Identity: Attested copy of any one of the following:

  • Passport
  • Driving License
  • Voters Identity Card

Identity Card issued by Employer (if employed in State/Central Govt.)

  • PAN Card
  • Letter from Employer (subject to the satisfaction of the bank)
  • Certificate of loan outstanding issued by the lender (for refinance cases only)
  • Any other information regarding repayment capacity that is necessary and will assist the bank in appraising the loan proposal

Applicant can repay the loan over a maximum period of 20 years under both the FRHL and the ARHL. Repayment will not ordinarily extend beyond the applicant’s age of retirement (if applicant is employed) or the applicant is reaching 65 years of age, whichever is earlier. However, the bank will endeavour to determine the repayment period to suit the applicant’s convenience.

Repaying the loan in EMls comprises of principal amount and rate of interest. Repayment by way of EMI commences from the month following the month in which the applicant avails full disbursement. In case of pending final disbursement, the applicant pays interest on the portion of the loan disbursed. This interest is called pre-EMI Interest. Pre-EMI interest is payable every month from the date of each disbursement up to the date of commencement of EMI.

The banks also offer the applicants a unique ‘Tranching’ facility for repayment of loan. Instead of paying Pre-EMI on the amounts disbursed, applicant can choose to pay an interim EMI of an amount convenient and thus commence repayment of principal even before the loan is fully disbursed. This would be useful in case when disbursements are likely to be spread over a longer period of time. *Conditions apply

Many banks offer various modes for repayment of the loan. Applicant can opt for direct deduction of monthly instalments by employer, issue post-dated cheques from salary account, issue standing instructions to bankers (ECS) or pay the instalments at any of their conveniently located collection centres.

Many banks offer various flexible repayment options like Step Up Repayment Facility (SURF), Flexible Loan Installment Plan (FLIP), Balloon Payment Plan (BPP) and Structured Repayment Plan (SRP). These flexible repayment options give applicants the freedom to structure the repayment schedule to suit their individual needs.

Security for the loan normally is first mortgage of the property to be financed and / or such other collateral security as may be necessary. Interim security may be required, if the property is under construction.

Collateral or interim security could be assignment to the bank’s life insurance policies, the surrender value of which is at least equal to the loan amount, guarantees from sound and solvent guarantors, pledge of shares and such other investments that are acceptable to the bank. Loans from the banks are available even if the applicant avails a housing loan from the employer. The respective bank has already entered into arrangements with several employers enabling employees to avail of loans both from the employer as well as the bank for the same property.

Please do ensure that the title to the property is clear, marketable and free from encumbrance. To elaborate, there should not be any existing mortgage, loan or litigation which is likely to affect the title to the property adversely.

Applicant can take disbursement of the loan after the property has been technically appraised; all legal documentation has been completed and has invested applicant’s own contribution in full. Own contribution is the total cost of the property less bank’s loan.

The loan will be disbursed in full or in suitable installments (normally not exceeding three in number) taking into account the requirement of funds and progress of construction, as assessed by the bank and not necessarily according to a builder’s agreement.

Applicant is advised to enter into such agreements with builders whereby payment is dependant upon the progress of work and not on a time-based schedule.

Yes, applicant can repay the loan ahead of schedule by making part or full prepayment. Many of the banks also offer a facility to accelerate the repayment of the loan by increasing the EMI at anytime, which will help applicant to repay the loan faster. This acceleration facility is available free of charge.

Yes, the applicant is eligible for certain tax benefits on principal and interest components of a loan under the Income Tax Act, 1961. As the benefits could vary each year, please do check out the current benefits available.

In many states in India, the agreement for Sale between the builder / seller and purchaser is required by law to be registered. Applicant is advised to lodge the Agreement for registration within four months of the date of the Agreement at the office of the Sub-Registrar appointed by the State Government, under the Indian Registration Act, 1908.

Applicant has to ensure that the properly is duly and properly insured for fire and other appropriate hazards during the pendency of the loan and to produce evidence thereof to the bank, each year and/or whenever called upon to do so. The bank should be the beneficiary of the insurance policy.

Loan Providing Banks

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