HOME PURCHASE LOAN

This is the common loan for purchasing a home.

You can take a loan for constructing a house, purchase of a ready built house / flat or a flat in resale, the takeover of existing loans from approved banks / housing finance companies, the purchase of a plot of land, for renovation of the house and extension of the house.
EMI (Equated Monthly Installments) is the amount payable to the lending institution every month, till the loan is paid back in full. It consists of a portion of the interest as well as the principal.
  • Some of the lending institutions sanction the loan without requiring you to identify property as a prerequisite for eligibility
  • Free accident insurance
  • Discounts
  • Waiving of pre payment penalty
  • Waiving of processing fee
  • Free property insurance
To qualify for a home loan, most of the lending institutions in India require you to be:
  • An Indian resident or NRI
  • Above 21 years of age at the commencement of the loan
  • Below 65 when the loan matures
  • Either salaried or self employed
  • Interest rates are different from institution to institution and generally range from about 9.25% to around 12 %. The interest on home loans in India is usually calculated either on monthly reducing or yearly reducing balance. In some cases, daily reducing basis is also adopted.
  • Annual reducing:
    In this system, the principal, for which you pay interest, reduces at the end of the year. Thus you continue to pay interest on a certain portion of the principal which you have actually paid back to the lender. This means the EMI for the monthly reducing system is effectively less than the annual reducing system.
  • Monthly reducing:
    In this system, the principal, for which you pay interest, reduces every month as you pay your EMI.
  • Daily Reducing:
    In this system, the principal, for which you pay interest, reduces from the day you pay your EMI. EMI in the daily reducing system is less than the monthly reducing system.
Keep the loan period constant and calculate the total amount paid for the home through the different loan options available.
Some institutions have a fixed rate of interest, which means the rate of interest remains unchanged for the entire duration of the loan. This means you do not benefit, even if rates of interest drop in the market.
This is the rate of interest that fluctuates according to the market lending rate. This means you stand the risk of paying more than you budgeted for in case the lending rate goes up.
Home loans are usually accompanied by the following extra costs:
  • Processing Charge: It's a fee payable to the lender on applying for a loan. It is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. The loan amount required by you cannot be less than the processing fee.
  • Pre-payment Penalties: When a loan is paid back before the end of the agreed duration, a penalty is charged by some banks/companies, which is usually between 1% and 2% of the amount being pre-paid.
  • Commitment Fees: Some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned.
  • Miscellaneous Costs: It is quite possible that some lenders may levy a documentation or consultant charges.
  • Registration of mortgage deed.
Repayment period options range generally from 5 to 15 years.
Usually, most companies give up to a maximum of 85% of the cost of the house. The 15%, sometimes called 'seed money', will have to be provided by the loan applicant. The amount, for which the applicant is eligible, is determined by the age, income, no. of dependents, monthly outgoing and repayment capacity. This varies from case to case.
In most cases, the property to be purchased itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. Some institutions may ask for additional security such as life insurance policies, FD receipts and share or savings certificates.
Some institutions ask for 1 or 2 guarantors, others require no guarantor at all.
On an average, loans are disbursed within 3-15 days after satisfactory and complete documentation and completion of all relevant procedures, including proof that 15% of the cost has been paid upfront to the seller of the property.
Most institutions are willing to consider the joint incomes of the applicants for deciding the loan amount. Some institutions do not require the co-applicants to be co-owners of the property to be purchased.
You can include your spouse/parents/children as a co-applicant for the Home 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.
Yes. These policies will be reviewed periodically.
The common documents that the financiers require at the pre-approval stage are:
  • Proof of Age
  • Copy of Bank A/C statements for the last 6 months.
  • Copy of latest credit card statement.
  • Passport size photograph
  • Signature verification from your banker
  • If you are salaried, you need to produce:
  • Salary and TDS certificate
  • Latest pay slip
  • Letter from employer
  • Your business track record
  • Copy of audited financial statements for the last 2 years
The disbursal stage (for property already located), you need to submit:
  • Allotment letters
  • Photocopies of title deeds
  • Agreement to sell
  • Encumbrance certificate
  • For self-construction: Approved plans and clearance certificates along with estimates