What are the types of home loans?

When will the Loan be disbursed?

When can I apply for a loan?

What is an Annual Reducing balance?

What are the various types of loans available?

What are the stages involved in taking a loan?

What security/collateral do I have to provide?

Is a personal guarantor a must?

Who can be the co-applicants for the loan?

How much time will it take for my loan to be approved?

How is the interest charged/calculated?

What are the loan tenure options??

What is the minimum loan amount?

Benefits of taking a home loan for Section 24 of the Income Tax Act

When put in figures, this is quite an amount:

Benefits of taking a home loan for Section 88 of the Income Tax Act

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What are the types of home loans?

• Home Equity Loans

• Home Extension Loans

• Home Improvement Loan

• Home Purchase Loans

• Land Purchase Loans

• Mortgage Loans

 

When will the Loan be disbursed?

• Your identification and selection of the property.

• Submission of the legal documents.

• Legal and technical clearance of the property

• Home Improvement Loan

• Home Purchase Loans

• Investment of your contribution towards the property

 

When can I apply for a loan?

You can apply for a home loan even before you have selected your property. The loan amount would be sanctioned or approved for you, based on your repayment capability.

 

What is an Annual Reducing balance?

An Equated Monthly Installment (EMI) has 2 components, interest and principal. When the interest is calculated on annual rests, the principal reduces only at the end of the year. Therefore, you continue to pay interest on a portion of the principal that you have already actually paid back to the lending company.

 

What are the various types of loans available?

All of these are available on an adjustable rate or a fixed rate.

• Home Loans

• Land Loans

• Home Equity Loans

• Office Premises Loans

 

What are the stages involved in taking a loan?

Sanction of the loan, whereby you get an approval for a specific loan amount based on the value of your property and repayment capabilities. Disbursement of the loan amount.

 

What security/collateral do I have to provide?

Typically the security for the loan is a first mortgage of the property to be financed, by way of deposit of title deeds and/or such other collateral security as may be necessary. The title to the property should be clear, marketable and free from any encumbrances.

 

Is a personal guarantor a must?

No, there is no personal guarantor required in most cases.

 

Who can be the co-applicants for the loan?

You could include your spouse as a co-applicant for the loan and we shall include his/her income to enhance your loan amount. Further, in case there are any other co-owners they also need to be co-applicants.

 

How much time will it take for my loan to be approved?

It takes a week for your loan to be sanctioned after you have submitted all the documents.

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How is the interest charged/calculated?

If you opt for an Adjustable Rate Home Loan, the interest rate would vary with the Bank Home Floating Reference Rate. Under the Fixed Rate Home Loans the rate applicable on the date of disbursement remains fixed during the entire duration of the loan.

• Fixed Rate Home Loans

• Adjustable Rate Home Loans

 

What are the loan tenure options??

You have the option of selecting a term you are comfortable with, ranging up to 20 years, provided the term does not extend beyond your reaching 65 years of age or retirement age, whichever is earlier.

 

What is the minimum loan amount?

You can get a home loan starting from Rs. 2 lakh (Delhi, Mumbai & Bangalore Rs. 3 Lakhs). The loan amount depends on your repayment capability and is restricted to a maximum of 85% of the cost of the property or the cost of construction as applicable. Repayment capacity takes into consideration factors such as income, age, qualifications, number of dependents, spouse's income, assets, liabilities, stability, continuity of occupation and savings history.

 

Points to be considered before choosing any home loan option

Property Types: You should know more about type of property in lieu of which you seek loan. There are loans offered by banks to resident Indians and NRIs for ready property, under construction property, self construction and home improvement.

 

Loan Tenure: The loans provided by financial institutions are offered in tenures or period of years. You should check out the tenure for loans available in the market. There are loan tenures available for up to 25years.

 

Repayment Options: You need to choose between fixed and floating rate home loans. Many banks and financial institutions will provide you with the option of switching from a floating rate home loan to a fixed rate home loan once a year at no extra cost. But you need to check the facts first with loan providing firm.

 

No Penalty option: there are any penalty options offered by few finance companies. In this mode, you can opt to pre-pay up to 25% of your loan every year. Pre-payment is permitted after a minimum of 6 months following loan disbursal.

 

Tax Benefits: You should know the right of your tax benefits on home loans. Resident Indians are eligible for certain tax benefits on principal and interest components of a housing loan under the Income Tax Act, 1961.

 

Always check with a financial home loan expert or financing company to understand home loan processes and to avail the best bargain on your home purchase.

 

The home buying process can seem complicated, but if you take things step-by-step and you know how to choose the right home loan, you will soon be holding the keys to your own home.

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Benefits of taking a home loan for Section 24 of the Income Tax Act

Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.

 

When put in figures, this is quite an amount:

Amount comes as follows

• Assume taxable income of Rs 4 lakh, placing the assessee in the highest tax bracket.

• Assume interest payment during the first financial year is Rs 1.60 lakh

• Taxable income stands reduced to Rs 2.5 lakh (Rs 4 lakh - Rs 1.5 lakh being the maximum limit)

• Total tax amounts to Rs 49,980 (tax of Rs 49,000 + surcharge of Rs 980)

• Tax saved is Rs 45,900 (tax @30% on Rs 1.5 lakh plus 2% surcharge as the investor is in the highest tax bracket)

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Benefits of taking a home loan for Section 88 of the Income Tax Act

You get a 20% rebate on repayment of principal during a financial year. Once again, over the years, the principal repayment eligible for rebate has been enhanced from Rs 10,000 to the current limit of Rs 20,000. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assesses is also considered under this amount.