Home Loan

Home Loan Features and Benefits

Home loan offers numerous benefits to the borrower including lower interest rates, tax benefits, flexible repayment time frame and much more. 

1) Attractive Interest Rates

Home loans are accessible at lower interest rates than other types of loans. Obtaining a home loan is better than going for any other loan type to purchase your dream property. Housing loans are offered at cheap interest rates since the lenders do not want to deal with missed EMIs and unpaid dues.

2) Due Diligence Of the Real Estate Property

The finest aspect about housing finance is that the bank will carry it out if you missed out to determine the property's validity. Furthermore, while evaluating the house loan documentation, bank employees conduct legal checks to verify that the borrower is not defrauded. Due diligence evaluates areas where the bank approves the transaction and alerts you if your property purchase is risky in any aspect. 

3) Tax Benefits With Housing Loan

People who have mortgages are eligible for income tax benefits. The deduction of income tax is a fantastic benefit of getting a property loan. It is available for the interest paid on a yearly basis. The amount of interest paid is subtracted from the income tax that must be paid.

4) Flexible Home Loan Repayment Period

Another feature that distinguishes a home loan from other types of loans is the payback period. You can request longer payback terms whenever it is most convenient for you. One can stretch the loan repayment tenure up to 25 to 30 years. The monthly instalments decrease as the repayment period lengthens, easing the EMI burden on the borrower.

5) Availability of Home Loan Balance Transfer

A housing loan allows you to transfer the remaining loan balance from one lender to another. There could be a variety of reasons for this, including interest rates, service fees, an unpleasant customer experience, among others.

6) Capital Growth

As per real estate data, the cost of properties has been constantly rising over the last decade. According to analysts, the capital appreciation of the real estate properties is significantly greater as compared to the paid interest amount. It therefore serves as a lucrative opportunity for property owners as now they can sell them for a higher profit.

Home Loan Overview

A home loan or mortgage loan is a set amount of money borrowed from NBFCs and banks to purchase a property. Purchases of apartments, new houses, and plots are eligible for house loans whereas for renovations, extensions and repairs of an existing home, you can opt for a home loan for renovation purposes. However, when choosing such products, scrutinise home loan interest rate so that the EMI amount doesn’t weigh you down. 

Skyrocketing real estate prices encourage people to take out a mortgage to become homeowners. The most important aspect of a home loan is that when you get it, the lender keeps your property as a mortgage. You must pay the debt amount through monthly instalments to gain complete ownership of the property. The house loan EMI is calculated by the lender using a home loan calculator or home loan cal.

Home Loan Tax Benefits

The repayment of a home loan consists of two parts: repayment of the principal amount and the interest rate. When filing income tax returns, these parts are claimed as a home loan interest deduction or a tax deduction. 

Section 80 EEA allows you to claim tax benefits for the interest component paid on a house loan. This part offers house loan borrowers tax incentives of up to INR 1.5 lakhs on the interest rate they must pay.

Particulars	Quantum Of Amount Deduction
Under Section 24	a. For self-occupied property: Rs. 2,00,000 b. For non-self occupied property: No set limit
Under Section 80 C	a. For self-occupied property: Rs. 1.5 Lakhs b. For non-self-occupied property: Rs. 1.5 Lakhs
Under Section 80 EEA	a. For self-occupied property: Rs. 1.5 Lakhs b. For non-self-occupied property: Rs. 1.5 Lakhs

Home Loan Eligibility Criteria

Banks and finance companies have pre-determined home loan eligibility criteria to verify and provide maximum ease to loan borrowers. Apart from the eligibility criteria, banks look at the applicant's credit history to establish creditworthiness and repayment patterns. 

• Applicant must be between 21 to 65 years
• Salaried or self employed
• Annual income
• Collateral security
• Assets, financial stability and occupational continuity
• Residence status (Indian or NRI)

Reasons of Home Loan Rejection

Some of the home loan rejection reasons are given below:

• Unpaid dues and other ongoing debts
• Applicant’s address present on the defaulter’s list
• Applicant's age does not come within the eligible age range
• Credit score below 600
• Multiple rejected loan applications
• Frequent job change
• Faulty repayment of ongoing debts
• Absence of required documents

How to Close Existing Home Loan?

A home loan can be closed either on the completion of the repayment tenure when you have successfully paid the entire loan amount or via foreclosure. 

If your repayment tenure is completed, you just need to visit the lender and fill out the required form for loan closure. Once you are done, the lender will provide you with the loan closure certificate and your property documents that were kept as mortgages at the time of loan approval.

If you have decided to repay the loan amount before completion of loan tenure, i.e. loan foreclosure, you will have to pay associated foreclosure charges. 

Once you pay the outstanding amount and the foreclosure, your debts will be cleared. The bank will process your foreclosure application and provide you with a loan closure certificate.

Home Loan: Service Charges And Fees

Following fees and charges are associated with home loans throughout the loan tenure:

Processing Fees	It is a one-time charge that the borrower is liable to pay to the bank or finance provider. Processing fee is charged for recovering the expenses incurred to process the home loan. It is non-refundable and is paid in advance.
Application Fees	It is also termed as administrative fee or login fee. The administrative fee is non-refundable and is charged before applying for a home loan. It is charged prior to loan approval. It can range from Rs. 2,500 to Rs. 6,500. In case of loan approval, the applicant will have to pay the applicable processing fee which will be computed after deducting this amount.
Prepayment or Foreclosure Charges	Lenders also term it as Pre Closure Charge or home loan closure charges. Home loan prepayment charges are applicable when a borrower decides to pay the loan amount in one go prior to the end of their tenure. Many banks and financial institutions don’t charge foreclosure fees specifically for floating-rate loans. It can range from 2 to 6 percent of the remaining loan amount.
Partial Prepayment Charges	Banks usually impose this charge when the borrower pays off a specific part of the outstanding balance amount. Afresh, floating interest rate home loans are exempted from this charge. If applicable, the part-payment charge varies from 0.5 to 2% of the outstanding loan amount.
Conversion Charges	Also known as Switching Fee, conversion charges are applicable when the borrower converts the floating-rate loan to a fixed-rate loan or vice versa.
Repayment Mode Swap Charges	This charge is imposed when you opt for a changed repayment method and dates. The charged amount for every request is Rs. 500.
Max Tenure of Any Home Loan	All major lenders offer house loans with a maximum repayment tenure of 30 years. The longer the repayment tenure, the lower the monthly instalments, which makes a loan tenure of 25 to 30 years quite appealing.
Maximum / Minimum Loan Amount From Bank	The maximum and minimum home loan amount that banks offer depends upon the property costs as per current market trends. At maximum you can get 85% of the property cost as loan amount based on property location, and your credibility. At minimum, you can loan 75% of the property price.

Types of Home Loan

A housing loan isn't simply for the purchase of a house. There are several types of home loans, and each has different interest rates. 

1) Home Construction Loan

Many prefer to build their own homes rather than buying one. In such cases, the loan amount is determined by the overall building cost, the property's age and any additional charges. Another benefit is that the entire loan amount can be accepted all at once or in instalments as needed. The rate of interest is determined by the loan amount and typically ranges from 6.85 to 9.50 percent.

2) Home Loan

The bank will lend the borrower up to 85 percent of the house's cost at an interest rate ranging between 9.85 to 11.25 percent. This form of home loan is available from almost all banks that offer loans.

3) Land Purchase Loan

This is an option that banks and NBFCs offer to borrowers. The bank will lend up to 85 percent of the land's value, with an interest rate ranging from 6.75 to 12.09 percent, depending on the area and credit score. Land is a good investment since a home can be built later after saving money. Additionally, land purchase loans are available at lower interest rates compared to other loan products.

4) Home Improvement Loan

A home renovation loan can be used to remodel your property. It can be used for a variety of purposes, including repairing flaws, painting, updating home interiors, waterproofing and much more.

Home Loan Interest Rates

Interest rates are critical for obtaining loans for plot purchase, house construction loans, and home remodelling loans. The interest rate on a home loan is a fixed percentage applied to the total borrowed amount. 

The current home loan interest rates have a significant impact on the applicant's expected interest rate. Even a minor shift in a bank’s house loan rates have a significant impact on the monthly EMIs. As a result, it's crucial to keep an eye on whether they incline, fall or remain stable. The best home loan rates are often touted as the lowest ones coupled with a comfortable repayment tenure. 

The home loan interest rate may vary in all banks based upon the applicant’s credit score. So, when you apply for a home loan, an in-depth research on housing loan interest rates of all banks is necessary. That way you will be able to do a comprehensive home loan interest rate comparison and decipher the lowest home loan rates. 

When applying for a home loan, the most effective technique to compare home loan interest rates and choose the best option is to conduct extensive research on home loan interest rates of all banks in 2022 and the banks offering lowest home loan rates.

The interest rate on a house loan is the percentage of the loan amount charged by the lender. It is expressed as a percentage and is largely determined by the overall loan amount and term. 

The best home loan rates may vary depending on presiding government rules, borrower's creditworthiness, the size or location of the property and the property's valuation.

Required Home Loan Documents

To avail of a home loan with utmost ease, you need to prepare the below depicted documents:

Documents for Identity Proof

PAN  and Aadhar Card	Applicant's Passport
Voter ID Card	Driving Licence

Documents for Address Proof

Utility bills (electricity or telephone bill)	Salary slips of last 6 months and Form 16
Identity proof that contain address, like Aadhaar Card	Bank account statements
Income proof and employment proof

Other Documents

Passport-size photographs of the applicant

For self-employed, business continuity proof will be required (5 years)