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Home Loan

What is Home Loan?

In this busy world, everyone’s dream is to have their own house so they can relax at the end of the day after the whole hectic day. When a loan is taken to build or buy a home, it is called a home loan. A home loan is an easy way to fund the purchase of your house as it is not a wise idea to burn all your savings to buy a land or a home. Home loan interest rates can be fixed or floating.

Types of Home loan:-

  • Home Purchase Loan
  • Land Purchase Loan
  • Home Construction Loan
  • Home Improvement Loan
  • NRI Home Loan
  • Balance Transfer Home Loans
  • Home Conversion Loan
  • Home Extension Loan

Home Purchase Loan:-

The home purchase loan is used for purchasing a home that is built by a builder or a pre-owned home. This loan is the most common loan and easily available in most of the financial institutions. The banks offer either a fixed rate or a floating rate. Usually, banks provide 85% of the market value of the house as a loan.

Land Purchase Loan:-

The land purchase loan is used for purchasing land or a plot in which the borrower wants to build their home. A majority of the banks offer this type of loan, so it is easily available. Most of the banks offer 85% of the land’s market value.

Home Construction Loan:-

This type of loan is specially designed for customers who want to construct their homes according to their desire instead of buying a pre-constructed house. In this type of loan, the plot or land in which borrower wants to construct their home should have been bought within a year to include the cost of a plot in the loan amount.

Home Improvement Loan:-

Home Improvement Loans is for those individuals who already own a home and wants to renovate it. Renovation can include repairing the existing house, painting of the walls, digging a bore well, electrical wiring, etc.

NRI Home Loan:-

This type of loan is for those individuals who are non-resident Indians and wants to buy a residential property in India. In this loan, you can choose a fixed or floating interest rate according to your will and convenience.

Balance Transfer Home Loans:-

By using a balance transfer loan borrower can transfer their loan from one bank to another bank for some reason like lower interest rates or better services offered by the other bank.

Home Conversion Loan:-

Home conversion loan is used when people want to convert the existing home loan to another type of home loan within the same bank. By paying some conversion fee you can change your existing home loan into another type of home loan.

Home Extension Loan:-

Home extension loan is used when your family grows and you want to extend your home, so you can extend your home without digging a huge hole in your savings. There are a lot of banks which offers home extension loan.

How to Apply for Home Loan?

Like every other loan home loan can also apply in two ways.

Online:-

  1. Go to the https://www.bankagent.in/  and compare the bank’s offers.
  2. Go to the https://www.bankagent.in/ and fill the form or you can go to the bank website by which you want to take a loan
  3. Submit all document which is asked
  4. After completing all these processes our agent will contact you
  5. If you full fill all the criteria which are required and your document is verified you will get approved.

Offline:-

  1. Compare banks offers on https://www.bankagent.in/
  2. Go to the bank branch by which you decided to take a loan
  3. Fill the form with the all correct information
  4. Submit the form along with documents which are required.
  5. After verifying your all information and documents the bank will approve you for the loan.

Documents Required for Applying for Home Loan:-

  • Identity proof:- Aadhar card/ PAN card/ Passport/ Voter id (anyone)
  • Residential proof:- Electricity bill/ Telephone Bill/ Lease agreement/ trade license (anyone)
  • If salaried:- Last 3 months Bank Statement, Income Tax Returns of the last 3 years, Salary Slip.
  • If self-employee:- Audited financials for the last two years, Last 6 months Bank statement, Proof of office ownership and Office address proof, Income Tax Returns of the last 3 years
  • Property Documents:- NOC from Society or Builder, detailed estimate of the cost of construction of the house, original receipts of the advance payments made for the purchase of flat, in case of purchase of flats approved a copy of the building plan.

Home Loan Eligibility Requirements:-

  • You should be an Indian citizen
  • For the timely repayment of the loan, you should have a regular source of income.
  • You must be aged 21 years old or above
  • Make sure you have at least three months of good credit history before applying for a home loan

Advantages of taking a home loan:-

  • By borrowing a home loan you can fulfil your dream of owning your own house
  • You have the facility of transfer your home loan to another bank/lender if they are offering you a lower interest rate in comparison to the existing one.
  • According to Section 24B of the Income Tax Act, you can claim a deduction for the full amount of interest in housing loans paid for a second house.
  • In comparison to other types of loan, the home loan tenure is higher up to 30 years.
  • You can build a good credit score by paying EMI and paying back the loan on time.
  • Before approving you for loan banks carefully checks that the property is completely legal and free from any kind of disputes and this is helpful for you as it specifies that your investment is secure from any fraudulent.

Home Loan Fees and Charges:-

  • Processing fees:- The Processing Fee is a one-time charge that is up to 1.5% of the loan amount. An extra GST is 18 half of the application charge and an additional GST charge which is 18% of the processing fee. The loan processing fee depends upon the lenders it varies from lender to lender.
  • Prepayment charges:- Prepaying is a charge which you have to pay if you wants to pay off your debts before the loan tenure completion.
  • Conversion fees:- When a borrower wants to convert their existing home loan to a different home loan scheme for a lower interest rate then the borrower has to pay some fee for the conversion.
  • Cheque dishonour charges:- If the borrower pays through the check and if the check is bounced due to some reason like insufficient balance then the borrower has to pay this charge.
  • Home insurance:- During the term, the premium should be paid directly to the company concerned to make sure that the insurance policy running during the tenure of the home loan.
  • Default charges:- If you fail to pay the EMI on the time then you have to pay default charges.

Best home loan lenders which provide best home loan rates:-

Banks

Interest rate Processing fee Tenure

SBI Home Loan

8.25%

0.25% of loan amount + GST  max. Up to 30 years

Axis Bank

 9.15% Up to 1% of loan amount,

Up to 30 years

ICICI Bank

9.05% 1.00% of loan amount

Up to 30 years

HDFC Bank

8.40% 1.5% of loan amount + GST

Up to 30 years

PNB Bank

 12.50%

Up to 1% of loan amount

Up to 30 years

Bank of India

 8.45 to 8.85% 0.25% of loan amount

Up to 25 years

DHFL

9.75% 0.50% of loan amount

Up to 30 years

YES Bank

9.75% 1.0% of loan amount

Up to 35 years

Tata Capital

12% 0.5% of loan amount

Up to 30 years

LIC Housing Finance

9.5% 1% of loan amount

Up to 30 years

Bajaj Finserv

9.50% 1% of loan amount

Up to 25 years

Indiabulls Housing Finance

11% 1% of loan amount

Up to 30 years

IIFL

9.50% 0.5% of loan amount Up to 30 years (for salaried)

20 years (self-employed)

Central Bank of India

8.60% 0.50% of loan amount

Up to 30 years

HSBC Bank

8.65% 1.0% of loan amount

Up to 25 years

Bank of Baroda

8.5% 0.50% of loan amount

Up to 30 years

Things to remember before taking a home loan:-

  1. Check the EMI is in your budget or not.
  2. Compare the current interest rates and home loan offers with the other banks
  3. Compare different lenders and their offers.
  4. Decide which banks term suits your needs.
  5. Longer loan tenure means lower EMI but more interest, so choose it wisely.
  6. Maintain the credit score above 750 to get the best offers.
  7. Read all the documents terms and condition carefully.

Difference between home loan and mortgage loan (loan against property):-

             Home loan

Mortgage loan

This loan is used for purchasing a home/land/plot. This loan is used for business and personal needs.
The tenure for this loan is usually up to 30 years. The tenure for this loan is usually up to 15 years.
Usually, banks offer up to 90% of  the property value as a loan banks offer up to 60% of  the property value as a loan
The interest rate for this loan is up to 12.00% The interest rate for this loan is up to 15.00%
The processing fee for this loan is up to 1% of the loan amount The processing fee for this loan is up to 1.5% of the loan amount

How to avoid Home Loan Rejection?

  • Before approving for any type of loan every bank check your credit history and CICBIL score. Your home loan application can be rejected if you have a low credit score and bad credit history, so always maintain credit history and credit score to get any type of loan.
  • If the applicant is discharged or over 50 years old, then there is a lot of chances that you will not get home loan approval. To avoid this situation you can add a co-borrower for your home loan.
  • Bank usually does not approve for unauthorized property and old properties because the resale price of the old property usually is very less. To avoid this situation check for the year of construction of the property and check the property is authorized or not.
  • If you have a low income and you have applied for a bigger loan amount then there is a lot of chance to get rejected. To avoid this situation you can add a co-applicant to increase your eligibility.
  • If the applicant is an entrepreneur then banks can reject the application. In such a situation, the only choice for the applicant is to provide some proof to guarantee the stability and development of their business.
  • Your loan application can be rejected if applicant’s signature or other information is mismatched so always provide correct information and documents
  • If the applicant is a fresher then there are chances of being rejected because banks prefer candidates with a stable position in a company where they have been employed for at least one year. To avoid this situation you can provide some security assessment.

What is the mortgage rate?

The mortgage rate is mortgage interest rates which are charges annually. The Mortgage rate is decided by the mortgage lenders and mortgage loan rates can fix or floating. Usually, mortgage rates depend on the applicant’s credit score.

Current mortgage rates:-

There is some banks list which provides the best mortgage rates.

            Bank

Mortgage rates

SBI Loan Against Property

10.30%

Axis Bank

11.35%

Indiabulls

10.50%

PNB Housing Finance

10.25%

ICICI Bank Loan Against Property

10.15%

DHFL

12.00%

HDFC Bank

9.75%

What is Home Equity Loan?

A home equity loan is basically a second mortgage loan. Your first loan is the one you used to buy the house, but if you created enough money, you can also put extra loans against the house. Home equity loans enable you to purchase more than any current mortgages against the estate against the price of your home. You can go to the mortgage broker because there are some lenders that only work with brokers, so your mortgage broker could have access to loan products that you don’t.

What is the FHA Loan (Federal Housing Administration)?

FHA loan is a type of mortgage loan which is approved by the Federal Housing Administration. This loan is specially designed for low-income applicants because there is a lower minimum down payment of 3.5% for credit scores of 580+ and lower interest rates.

Pradhan Mantri Awas Yojana (PMAY):-

Pradhan Mantri Awas Yojana (PMAY) is a project of the Government of India which will provide low-cost houses to the underprivileged with the goal of building 20 million affordable houses by March 31, 2022. Under this project, houses will be constructed using environmental-friendly building techniques in chosen cities and towns to help India’s deprived.

How to apply for Pradhan Mantri Awas Yojna (PMAY):-

  • Visit the official website of PM Awas Yojana http://pmaymis.gov.in/
  • Click on the “Citizen Assessment” choice under the “Menu” segment
  • Enter your Aadhar card number
  • After entering Aadhar number you will be redirected to the application form.
  • On that page, you have to fill personal detail, income details, current residential address, and your bank account details
  • At the end of the page, press the “I know” choice and press the “Save” key.
  • After clicking the “Save” button you will get a system generated application number which you can save for future usage
  • Download and print the application properly filed
  • Submit the form and the required documents to your nearest CSC office centres and financial institution/banks.

Eligibility Criteria for Pradhan Mantri Awas Yojna Scheme:-

  • Any family with an estimated full income from Rs.6 lakh to Rs.18 lakh can register for PM Awas Yojana.
  • People are permitted only to buy/build fresh buildings, on an already built house you cannot avail PMAY benefits
  • Individuals belonging to the low-income community and economically weaker sections can apply for this scheme
  • It will also be allowed for scheduled tribes and castes.
  • Special priorities for ground floor housing will be given to senior citizens and different capacities.

What is a top-up home loan?

A top-up loan is the type of loan which banks offer to those borrowers who have already taken a home loan from the lenders. Banks mostly offer loans to a person only if either he already has a relationship with the bank due to a loan from that bank or a lot of time have been passed after repaying the original loan amount. Sometimes it happens that the bank does not agree to give you a loan, in such a situation, you can transfer the current loan to a different bank and then apply for a top-up loan. Every bank offers different loan amounts, so it depends on the banks that how much amount borrower can avail for the loan.

For HDFC Bank, the cap on the top-up loan amount is Rs.50 lakh, whereas, for SBI Bank, it is Rs.5 crore. However, as a general rule of thumb, the maximum top-up loan amount cannot exceed 70-75% of the current market value of the house minus the outstanding amount on the home loan.

Eligibility criteria for a top-up home loan:-

  • the top-up loan can be taken by anyone who has already taken a loan from the lender
  • The ability to pay off the debt which depends on the repayment of the previous home loan, whether it was paid on time or not.

Documents required for a top-up home loan:-

  • The borrower must have identity proof like aadhar card, voter card, PAN card or driving licence etc.
  • Candidate must have address proof such as aadhar card, utility bill or voter card etc.

How to apply for a top-up home loan:-

  • Visit https://www.bankagent.in/
  • Search for a top-up home loan
  • Click on the apply now button
  • Fill the form and submit it with the documents

Features of top-up loan:-

  • A person who has taken multiple loans can pay the others loans by taking a top-up loan, by doing so his credit score will be improved and his burden of the other loan will also be reduced.
  • Many lenders also permit their borrowers to club the main loan and repayment of subsequent loans to make repayment of loans easier. Banks also allows customers to pay back the borrowed amount in EMI.
  • Customers may take advantage of the top-up loan to fulfil their personal and professional financial needs that can not be fulfilled using current loans funds.
  • Customers can transfer their loan to another bank for a low-interest rate.
  • Customers get faster approval due to the existing relationship with the bank for the loan.

Benefits of top-up home loan:-

  • Any person can pay his other loan by taking the top-up loan. This way the borrower is not burdened to repay their other loans. The combination of loans will help to reduce the total cost of interest, that is the main reason that borrowers choose the top-up loan.
  • When a person approaches the same bank for a top-up loan, who has already taken his home loan then he does not require many documents because he already has a relationship with the bank. However, before approving for the top-up loan, the bank checks that the history of the loan on which you are taking the top-up loan is clear or not, whether you fill it on the instalment time or not.
  • Since the customer has already a relationship with the bank due to the existing loan, the Loan process does not take long and the customer can meet an immediate financial need.
  • Most banks do not ask for any collateral for top-up loans, which makes its process easy.
  • Sometimes when customers apply in the same bank, they charge a higher interest rate, in such a situation, the customer can get his loan transferred to another bank. By transferring the loan to the other bank customers can get a top-up loan at a low-interest rate.

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