Home Loan: Facts you must know
A home loan falls into the category of the secured loan as it is secured against the property. It can be availed from a nationalized bank, private bank or a non-banking finance company. There are many points that one must keep in mind while going for the home loan. Here are a few things that one must keep in mind.
Many of the documents are required while going for a loan. The requirements of documents depend on the type of loan as there are several types of loans that fall into this category. The loan can be availed for the fresh property, purchase of land, renovation of the home, home construction, extension and refinance and also improvement of the home. The requirement of documents varies as per the type of loan. Usually in the case of fresh property the documents of the property as well as the person on whose name the property is going to be purchased. Usually, the property documents required include the basic documents of the land or home, and personal documents of the person such as identity proof, income proof and income tax return that can show the income of the person. In case of other than the fresh property for all loans, valuation reports by official valuers.
The calculation of loan amount:
There are specific parameters of every financial institution according to which they provide the loans. The income, value of the property on papers as well as in the market, report of the valuer, and bills of the home improvement services, etc., matters while going for the loan. Usually, the financial institution offers 90% to 120% amount depending on their parameters. Here one must note that the amount funded is not only on the base of parameters but the income of the applicant is also equally important while sanctioning the loan.
The eligibility for loan amount:
The applicants’ eligibility is decided according to his profile. He may be a salaried person, businessman or self-employed person. The loan can be availed to an Indian citizen or a non-resident Indian. The person who applies for the loan must be below the age of 60 years. The tenure of the loan can range from 10 years to 25 years as per the agreement between the lender and the borrower. There is also a provision of CIBIL score which needs to be good for an applicant.
How to apply for a loan?
Well, in this age the loan availability is not a big deal as many of these institutes have their executives who can offer services of availing loan at client’s home also. As an applicant, you need to fill a form and furnish required documents. In case of an NRI, there may be a requirement of additional documents such as a copy of Green card or passport as well as residents proofs.
Once the loan is sanctioned the payment is provided by the financial institution through direct credits to account or through a cheque. Once the amount is paid by the bank from a month onwards, the repayment starts. It is in the form of the EMI (Equally amount installment). The EMI includes the principal amount as well as interest. The rate of interest also varies as per the financial institute. The interest is calculated as per different systems such as daily, monthly and yearly reducing. The repayment is schedule as per the pre-decided terms. At the beginning of the repayment, only the applicant is provided with a repayment schedule.
There can be a loan on the fixed interest rate or floating one. The fixed rate of interest is one where despite the change of interest rate by the lender the borrower is not affected. However, his tenure may get affected to meet the additional cost of an increase in the rate of interest. In case of floating rate of interest the rate of the interest to a particular borrower may change as per the change applied by the concerned bank or financial institute. The tenure here remains fixed, but the EMI amount may change to meet the change of interest rate.
Charges, Security and time period:
For a borrower, there are many other charges than a loan amount only that he needs to bear. Some of them are document charges, processing charges, and stamp charges. In case of a pre-closure of the loan, the borrower may have to pay the penalty also which can be a fixed amount or a percentage of the pending amount of the loan.
In the case of home loan usually one does not need to provide any security as the home itself becomes the security where until the loan amount is paid, the lender can get the possession of the same at any moment if there is any default in payment is made.
As far as the time frame for disbursal of a home loan is concerned, it varies from the institute to institute. For an applicant, the documentation is the main part where it takes time. Once the file is logged in it takes around 10 to 15 days.