Updated: Oct 29, 2020
Q. What is a Home Loan?
A. It is a loan offered by a bank or housing finance company, (commonly referred to as lender) to home buyers (known as borrowers) for purchase of new property, construction of house or renovation of existing property. The borrower/customer availing home loan is required to submit the title document of the property with the lender till the loan repayment is completed by borrowers.
Q. Which all property transactions are covered for home loan?
A. Individuals can apply for housing loan in below scenarios:
· For purchase of a new house or apartment from the developer or developing authority
· For purchase of house or apartment from existing owner in resale transaction
· For construction of house on pre-owned plot of land
· For purchase of plot of land for the purpose of construction of house for self-usage
· For renovation of existing house/flat
· Additional loan/Top-up loan on existing home loan
· Balance Transfer of Existing loan from one bank or housing finance company to another
Q. What is the tenure of a home loan?
A. Home loans are long term loans with a minimum tenure of 5 years and a maximum tenure of 30 years. The tenure offered to borrowers usually depends upon the age at time of loan application and loan maturity. As a thumb rule the minimum age at the time of applying for home loan, borrower should be minimum 21 years of age.The norms at the time of loan maturity are as under:
· Salaried borrowers- The maximum loan tenor is limited to 60 years or age of retirement whichever is earlier.
· Self-employed borrowers- The customer should not be more than 65 years of age at the time of loan maturity.
Q. What is the Eligibility Criteria for a Home Loan?
A. Applicants with regular source of income are eligible for home loan. Home-loan can be availed broadly by below category of customers:
· Salaried customers
· Self-Employed customers having their own business
· Salaried NRI customers working abroad.
Q. What are the basic criteria considered for home loan eligibility?
Income level of the applicant
Age of the applicant
Qualification & experience
Availability of the basic documents-Age proof, Address proof, Signature proof etc.
Number of dependants and earning members in the family.
Fixed monthly expenses
Repayment track of existing loans.
Q. Who can be joint borrowers in case of a home loan?
A. Immediate family members such as your parents, spouse ,siblings and children are allowed to be joint borrowers in case of a home loan.
Q. What is the maximum number of co-applicants for a home loan?
A. The maximum number of joint applicants is usually limited to 5 or 6, depending on the lender.
Q. What is EMI?
A.EMI is Equated Monthly Instalment and is the monthly instalment which needs to be paid by borrower to lender for repayment of the home loan. The EMI includes 2 components—Payment towards Principal loan & Interest on outstanding loan. This is a monthly payment to be made by borrower to lender till the time of loan maturity.
Q. What are different modes of loan repayment?
A. There are different ways to pay off your loan such as issuing post-dated cheques for the tenure of the home loan, getting the amount deducted automatically from your salary or by issuing standard instructions to the lender for ECS (Electronic Clearing System) wherein the EMI is automatically deducted from your bank every month. In current scenario ECS is the most preferred and commonly used method for repayment of home loans.
Q. Is prepayment/foreclosure of home loan allowed?
A.Yes, the borrower has an option to pre-close the loan by making a bulk payment before the completion of actual loan tenor. Most of the banks and Housing finance companies are currently not charging any penalty or fees on pre-closure of the home loan.
Q. What is part-prepayment of the loan?
A. Instead of making the full payment of out-standing loan, borrowers also have an option of making the lump-sum payment on home loan and thereby reducing the outstanding principal.The bulk payment is adjusted towards deduction from outstanding principal and thereby helps in reducing the EMI or loan tenor as per customer choice.
Also Read: How to Save Money on your Home Loan
Q. What are the key charges associated with a home loan process?
A. Common charges associated with home loan are as under :
Processing Fee- When applying for a loan, a fee is paid to the lender known as processing fee. The amount paid could be either a percentage of the loan amount or a fixed amount that is paid in lieu of carrying out the loan sanction formalities.
Pre-payment/Foreclosure Charges- Although most Banks/ financial institutions no longer charge any penalty on foreclosure, however some institutions do charge fees, if the loan is closed before completion of min duration for example- 6 months to 1 year.
Miscellaneous charges- These days all charges are usually included as part of processing fee. However some banks still charge separately for Documentation, stamp duty, credit bureau report issuance charges, legal and property valuation charges etc.
Q . What are common documents required at the time of home loan application?
A. The documents that need to be submitted may vary from one lender to the other. Some of the necessary and common documents to be submitted include the following-
Completed loan application form
Passport size photographs
Identity proof – Aadhar card/PAN card/Passport/ DL/ Voters ID
Residence proof- Aadhar card/telephone or electricity bill/ passport/ voter ID card
3-6 months salary slip of for salaried customers
Lat 3 years Income tax return with Profit & Less account, balance sheet
Bank statement for at least past 6 months
Title documents of the property being purchased, at least for last 13 years.
Copy of plan approved for the proposed construction/extension
Q. Is there any tax benefit available on home loans?
A. The tax benefit on home loan is divided into two sections-
Tax exemption on repayment of the home loan principal: This is the deduction allowed under Tax Section 80C with a maximum annual tax deduction of Rs, 150,000 under the section.
Tax benefit on the interest rate for a home loan: Under Section 24 of the Income Tax Act, borrowers can avail the tax benefit on the amount of interest paid on a home loan to the maximum limit of Rs. 2 lakhs for a self-occupied property.
Tax benefit for Joint Borrowers: In case of joint home loans, each of the co-borrowers is eligible to receive a total of Rs. 3.5 lakhs (1.5 lakhs under section 80C + 2 lakhs under section 24) as tax exemption.
Also Read: How to Save tax on home loan
Q. Is it mandatory to have a co-applicant for the home loan ?
A. All the owners of the property mandatorily need to be co-applicant to the loan.In case the property is owned by a single individual, then immediate family member-spouse,parents, children, sibling need to join as co-applicant to the loan. Usually, all the lenders insist on having a co-applicant or guarantor for loan, however, in exceptional circumstances, loan can be sanctioned to single borrowers/applicants.
Also Read: Do I need my husband or wife sign to get housing loan
Q. What is pre-EMI Interest?
A. In case a loan is availed by customer for under-construction property then banks/hfc disburse the loan amount in tranches, as per the progress in construction stage of the property. In such cases, borrowers get an option to pay the simple interest on loan amount disbursed, which is known as pre-emi. This interest is payable monthly from the time the loan is disbursed till the time the EMI payments start off. The pre-EMI interest amount is lower than the home loan EMI as the principal payment portion is excluded for pre-EMI interest payments.
Q. What is the margin money/own contribution on a home loan?
A. Borrowers usually get loan to a maximum of 90% of the property value. The balance amount which the customer needs to pay upfront from his end is known as margin money or own contribution amount. The margin on a home loan refers to the percentage of the cost of the home that is not covered by the lender providing you with the home loan
Q. What is an amortization schedule?
A. Amortization is a table with details of interest payment and periodic principal of a loan along with the amount outstanding after each payment and the decrease of loan balance till zero.
Q. Is there any subsidy on home loan?
A. Interest Subsidy up to 2.67 lakh per house is admissible for Beneficiaries of Economically Weaker Section (EWS)/Low Income Group (LIG), Middle Income Group (MIG)-I- and Middle-Income Group (MIG)-II seeking housing loans from Banks, Housing Finance Companies and other such institutions for acquiring/constructing houses. The interest subsidies of 6.5%, 4% and 3% on loan amount up to Rs. 6 lakhs, Rs. 9 lakh and Rs. 12 lakh are admissible for a house with carpet area of up to 60, 160 and 200 Sq.Meter for EWS/LIG, MIG I and MIG II respectively. The benefit for EWS/LIG beneficiaries under CLSS works out to as high as Rs. 6 lakhs over a loan period of 20 years.
Also Read: Pradhan Mantri Awas Yojna
Q. Can we convert personal loan to home loan?
A. If a borrower is running a home loan with a lender, he has the option to avail a top-up loan on existing property. A top-up loan is basically an additional loan over and above the existing loan without offering any additional security. This amount is offered to borrower in his account and can be used for closure of any existing personal loan. The rate of interest charged for Top-up loan is much lower than personal loan, hence its beneficial to avail top-up loan as compared to personal loan.
It may be noted that offering a top-up loan is subject to property valuation, eligibility and discretion of lender
Q. How to reduce EMI on my loan ?
A. Existing borrowers have the option of reducing the ongoing rate of interest by pro-actively reaching out to their bank or lending institution. Banks usually charge a nominal conversion/switch fee (Rs 2500-Rs 5000) for reducing the loan tenor.The customer gets option of either reducing the loan tenor or reducing the EMI on reduction of ROI. Therefore, an aware and pro-active approach from customer can certainly help in saving money.
Also Read: How to Save Money on your Home Loan
Q. Which is better- to make a prepayment of the loan and foreclose it or keep paying EMI ?
A. Considering the tax savings and other advantages associated with home loan, foreclosure of the loan by making one time bulk payments is not wise decision. However, part pre-payments can be utilized for reducing the loan obligation, as these are deducted from the loan principal outstanding and not towards the interest. The borrowers get the option of either reducing loan tenor or EMI.
Also Read: How to Save Money on your Home Loan
Q. Where to check online if home loan subsidy under PRADHAN MANTRI AWAS YOJNA is not received?
A. To check the status of your subsidy, pls write a mail to lending bank or housing finance company, clearly mentioning the loan account number. The mail ID of customer service department or nodal office of the concerned bank/HFC can be used for this purpose. Usually it takes 3-6 months’ time after the loan disbursement for subsidy to be credited in the loan account of the customer.
In case of any delay or complaint from your lender in release of subsidy, pls register your complaint with NHB online at the link mentioned below
Q. Can I discard by home loan application after applying to my bank or HFC ?
A. Yes, after applying for a home loan if you decide not to continue with your loan application, you can cancel or withdraw the application using any of the below methods:
· Write a mail to your bank or HFC to stop the processing of your loan application, stating the reason for same
· Submit a written request in person for cancellation or to stop the processing of your loan application and obtain acknowledgement from the concerned official
· In case the loan has been sanctioned but you don’t want to avail the disbursement then a written request can be submitted for the same accordingly either in mail or a written letter.
Q. What is the ongoing home loan ROI post covid-19 ?
A. The lowest home loan ROI available I s 6.95% which is being offered by lenders like SBI or HDFC. The ROI of 6.95% is being offered subject to criteria of loan amount, property ownership, CIBIL score etc.
Q. Can I apply for home loan, if I am already running other loan like personal loan,car loan or business loan ?
A.Yes, you can apply for home loan as long as your property is not mortgaged or given as security for any other loan.The lending bank or HFC will assess the loan eligibility basis your income and obligations of the ongoing loans and sanction the loan accordingly.
Q.Why is legal assessment and valuation of the property done after home loan sanction ?
A. In case of a home loan, pre-sanction can be given to customer before the property is identified, this helps the customer in knowing his eligibility prior to going for purchase of property. The customer also has an option to change the property after sanction, in case he wishes to do so. Therefore, banks/HFC’s usually ask for property documents from customer after loan is sanctioned and do the valuation of the property accordingly. The sanction of the loan is always subject to clear title of the property in legal and technical.
Q.Can you prepay/Foreclose the loan after claiming Subsidy under PMAY ?
A.Yes, the customer can foreclose prepay the loan after receiving loan subsidy in his account.There is no penalty associated with the same.
Q. After Home loan Transfer, how much time it takes for Top-up loans ?
A. For a Home loan balance transfer -Top-up transaction, customer can avail the top-up loan once the loan with previous lender is closed, NOC issued and the original docs are received in custody of the new lender-Bank/HFC. Usually, this process takes a duration of 15-20 days and may vary depending on the bank/HFC.
Q. I have opted moratorium for home loan will this affect new disbursement request for home loan ?
A.In the current scenario, banks are not disbursing new loans to customers who have availed moratorium on the existing loans.However, once you exit the moratorium,pay-off the dues/pending EMI on your existing loan and furnish the proof of same to your lender, then new loan can be sanctioned/disbursed subject to satisfaction of other criteria.
Q. What needs to be done in case title docs are lost by lending institution from which home loan is availed ?
A.In case the title docs of the property are lost by the lending institution/bank, then bank can recreate the title documents at its own cost by following the appropriate legal procedure which involves filing of FIR, news paper publication, issuance of no claim letter by advocate and re-creation of title docs.
Q. In case of death of main applicant to the loan, who will bear the loan and who will get the property?
A. In case of death of main applicant to the loan, the loan repayment responsibility lies with the co-applicant to the loan. Since all the co-owners of the property are required to be co-applicants to the loan, hence in a scenario where property is co-owned by co-applicant then there is no conflict and therefore the property ownership and loan liability both pass on to the co-applicant. However, in a scenario where the co-applicant to the loan is not co-owner of the property then the property ownership is decided basis the legal heirship and succession certificate needs to be obtained from the court of law.In common practise, co-applicant is either spouse or blood relative so that in an unfortunate event of the demise of main applicant the title of property and loan liability are passed on to the same person.
Q. Time period for submission of death certificate in case of loan?
A. In case of demise of applicant to the loan, the lending institution should be informed immediately and copy of death certificate should be submitted as soon as it is issued by respective authority.
Q. Can I get loan for reconstruction of my old house ?
A.Yes, you can apply loan for renovation/reconstruction of old house under self-construction/renovation/home improvement loan depending on the condition of of existing house and extent to which construction needs to be done.
Q. Can spouse come out of surety of home loan due to quarrel between husband and wife and are applying for mutual divorce?
A. In case the property is co-owned by both husband and wife then, both need to be joint applicant of the loan till the time property is co-owned by both of them
In case the property is owned by only 1 one partner, then divorce order/decree from court needs to be submitted with the lender for removal of joint applicant who is not owner of the property along with other documentation as per the process.
However,it is a time taking and tedious process, an easy option which can be applicable in both the options stated above is to sell-off the property and foreclose the loan with the bank/HFC.