Banking Assistance

There are different types of home loans available in the market to cater to borrower’s different needs.

• Home Purchase Loan: This is the basic type of home loan that has the purpose of purchasing a new house.
• Home Construction Loan: This type of loan taken when the borrower wants to construct a new home.
• Land Purchase Loan: It is that loan that is taken to purchase land for construction & investment purposes.
• Home Improvement Loan: This type of home loan is for the renovation or repair of a home which is already bought.
• Home Extension Loan: This type of the loan serves the need when the borrower wants to extend or expand an existing home, like adding an extra room, etc.
• Home Conversion Loan: It is that loan wherein the borrower has already taken a home loan to finance his current home, but now wants to move to another home. The Conversion Home Loan helps the borrower to transfer the existing loan to the new home which requires extra funds, so the new loan pays the previous loan & fulfills the money required for a new home.
• Bridge Loan: This type of loan helps finance the new home of the borrower when he wants to sell the existing home, this is normally a short term loan to the borrower & helps during the interim period when he wants to sell the old home & want to buy a new one, It is given till the time a buyer is found for the old home.

Interest rates differ from bank to bank and normally they range from 9.95% to 16%.

Most banks adopt the yearly reducing-balance method, which accounts for your principal repayments only at the end of their financial year. As a result, you pay interest on the principal that you have already returned to the bank. The effective interest rate is therefore higher than the quoted interest rate by around 0.7%. Some banks may also follow the daily or monthly reducing-balance method, which results in a lower interest burden.

The interest on home loans is usually calculated on a monthly reducing or yearly reducing balance. In monthly reducing balance, the principal on which you pay interest reduces every month as you pay your EMI. However in yearly reducing balance, the principal is reduced at the end of the year, therefore you continue to pay interest on a certain part of the principal which you have actually paid back to the bank, which basically means the EMI for the monthly reducing system is effectively lesser than the yearly reducing system of calculating the interest.

Fixed-rate of interest means that the interest rates remain FIXED for the entire duration of the loan. This means that you do not benefit, even if the rates of interest drop in the market.

Floating interest rate means that this rate of interest that fluctuates according to the market lending rate.

EMI or Equated Monthly Instalments refers to the fixed sum of money that you will be paying to the bank every month. The EMI comprises both interest and principal repayment. The amount of the EMI depends on the quantum of loan, interest rate applicable and the term of the loan.

The maximum period over which one can pay the loan varies for every bank and is also different for every scheme. Also, your residential status makes a difference. If you are a resident Indian, you could avail of a loan for a duration of 5-20 years. Few banks offer a 20-year repayment period, generally at a higher interest rate. As a Non-Resident Indian, you can only avail of a loan for a maximum period of 7 years.

The maximum amount that you can borrow depends on factors such as:

• The purpose of the loan.
• Whether it is for purchase of property or improvement or renovation.
• Or purchase of land for development etc

Besides, your residential status (whether resident Indian or Non-Resident Indian) will also be significant on the maximum quantum of loan that you can borrow. Typically Home Loans are provided for in the range of 75%-85% of the cost of the property, including the cost of land.

Your eligibility is determined by your repayment capability, taking into account, factors such as:

• Income
• Qualifications
• Age
• Spouse’s income
• No. of dependants
• Stability and continuity of occupation
• Assets/Liabilities.
• Savings history.

The most important concern of banks in determining your loan eligibility is whether or not you are contentedly able to pay off the amount you borrow.

Every bank has its own list of documents that one should submit at the time of application. The common documents that the banks ask for at the pre-approval stage are:

• Passport size photograph.
• Age proof.
• Copy of Bank A/C statements for the last 6 months.
• Copy of latest credit card statement.
• Signature verification from your banker.

• Your business track record.
• Copy of audited financial statements for the last 2 years.

• Salary and TDS certificate
• Latest payslip.
• Letter from employer.

Approved plans and clearance certificates along with estimates.

Yes, your salaries can be clubbed for the purpose of calculation of the loan amount. This can be done either when the property is jointly held with the spouse or the spouse stands as a Guarantor.

If all the necessary documents are in order it takes around two weeks for the processing of one’s application and takes 1 more week for the bank to inspect the property papers and make the disbursement.

Approval is valid for 3 months to give you enough time to choose a Flat / House of your choice.

Yes, you are eligible for tax benefits on the principal and interest components of the loan under the Income Tax Act, 1961. The benefits could differ each year; do check the current benefits available.